Dow manages new high; key indicator fails; Russell 2000 sinks

Weekly Review: MAAD & CPFL Analysis

Daily S & P 500 Emini Futures contract with Cumulative Volume (CV)

Weekly S & P 500 Emini Futures contract with Cumulative Volume (CV)

Another indicator that bears monitoring is our Call/Put Dollar Value Flow Line (CPFL). After reaching its best level back on June 11 since entering into a rally phase after the October 2011 market lows, CPFL declined for nearly two months to a short-term low on October 9. During the decline since June, the indicator not only sank below its two-year-old uptrend line, reaching levels not seen since last February when the S&P was quoted toward 1500, but despite improvement after that October 9 low, CPFL still remains nearly 50% below its June high. CPFL continues to suggest that options players have been unable to muster much enthusiasm, as measured on a Dollar Value basis, over the past five months and despite movement to new highs by the major indexes. In other words, June was the peak of the rally that began last November for the options crowd and that divergence is bearish for the market’s longer-term prospects.

Index Price Channel Stops (10-Bar MAs of Highs/Lows ) Weekly Monthly
 

11/4

11/5

11/6

11/7

11/8

11/8

11/30

S&P 500 Index

SELL 1742.92

SELL 1748.37

SELL 1751.57

SELL 1753.46

SELL 1754.04

SELL 1664.08

SELL 1500.00

Dow Jones Industrials

SELL 15408.79

SELL 15449.80

SELL 15483.76

SELL 15504.96

SELL 15520.15

SELL 15040.79

SELL 13944.86

NASDAQ Composite

SELL 3899.58

SELL 3910.09

SELL 3915.09

SELL 3916.39

SELL 3915.17

SELL 3671.35

SELL 3145.05

Value Line Index

SELL 4139.47

SELL 4151.05

SELL 4155.07

SELL 4154.80

SELL 4150.14

SELL 3909.50

SELL 3358.97

Russell 2000

BUY 1116.27

BUY 1118.36

BUY 1119.95

BUY 1118.32

BUY 1115.25

SELL 1040.17

SELL 887.74

Note: Stop levels, a function of the extant trend, are based on the trailing moving average price channels for the Highs or the Lows of an index. Whether or not a specific index is suggesting a “Buy” or Sell” is determined by whether or not index prices are above or below the current channel Stop levels. Stop levels should only be used as an entry or exit guide and in conjunction with other market entry and exit strategies.

In sum, despite those new highs made by the major indexes early last week amongst caveats, there are nonetheless small cracks in this rally’s dike. If more selling on the near-term develops, it could turn out that the fissures become even more pronounced and that the staying power of the next larger Intermediate Cycle is brought to center stage. In a word, nothing but new highs in all of the indexes, Daily MAAD, Cumulative Volume, and CPFL would give this market the same kind of bullish health it demonstrated late last year.

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