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

Weekly Review: MAAD & CPFL Analysis

But it is the failure of Daily MAAD to better its October 22 high, a feebly higher high at that, after another two weeks of trading that is telling. That MAAD failure is the first negative divergence since the broad market began the rally that has persisted on the Intermediate Cycle since last November 16. Daily MAAD had been a cheerleader for higher prices either before or into each short-term advance within the context of the intermediate uptrend. Until now. That peak on October 22 and the failure by Daily MAAD to make new highs with prices thereafter indicates Smart Money may have begun to back away from this market. In fact, for at least the better part of the past two weeks it appears they have been selling into strength.

Daily S & P 500 with Cumulative Volume (CV)

Weekly S & P 500 with Cumulative Volume (CV)

While Daily MAAD could make a new high with only another 12 positive issues, a net gain that could be achieved in just one trading session, we would not be surprised to see the indicator atrophy or decline further in the days just ahead, as more profit-taking comes into the market. In fact, the loss of another 26 issues would put Daily MAAD right at its uptrend line stretching back to the low the indicator made last November. What would be the worst case for bulls would be for more short-term weakness to develop to the extent all of the major indexes register new short-term negative trends while Daily MAAD continues to work lower and then terminates its year-old uptrend. Such action by Daily MAAD would then likely to spill over into Weekly MAAD and would be a suggestion the larger Intermediate Cycle had ended.

If the intermediate trend turns negative the predominant issue would then become the status of the larger, and more important, long-term bull market begun in March 2009. In a market where everybody is “in,” who is left to sell to? Or, “if things couldn’t be better?” then why buy? MAAD may be providing early clues that will help answer those questions.

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