Market up, but no new highs; key indicator fails again

MAAD & CPFL Review

 

Market Snapshot for session ending 11-4-13
 

Last

Day Change

%Change

S&P 500 Index

1767.93

+6.29

+.36%

Dow Jones Industrials

15639.12

+23.57

+.15%

NASDAQ Composite

3936.59

+14.54

+.37%

Value Line Index

4183.81

+33.95

+.81%

Russell 2000

1108.28

+12.61

+1.15%

Minor Cycle* (Short-term trend lasting days to a few weeks) Positive / Neutral

Intermediate Cycle* (Medium trend lasting weeks to several months) Positive

Major Cycle* (Long-term trend lasting several months to years) Positive

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • Major indexes bounced higher Monday, but no new highs were made. Day’s largest gainer was Russell 2000 that remains negative on Minor Cycle.
  • Market volume declined 12.1%.
  • Short-term trend remains positive in S&P 500 and index must decline below lower edge of 10-Day Price Channel (1748.37 through Tuesday) to reverse Minor Cycle to negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1664.08 through November 8).
  • Our VIX-based volatility indicator, VBVI, now “Overbought” on Minor Cycle, rose Monday to 93.87% from Friday’s 92.03%. At September 19 short-term high VBVI peaked at 92.4%.
  • Daily MAAD was positive by 14 to 5 Monday, but was again unable to better October 22 new high and best level since March 2009. Indicator remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last “Neutral” at 1.01.
  • Daily CPFL was positive by 3.31 to 1 Monday, but remains below short-term high made last Thursday and best level since October 9 short-term low. But indicator remains well below June 11 short to intermediate-term high, uptrend line stretching back to October 2011, and major resistance peak made February 2011. CPFL Daily Ratio was last moderately “Overbought” at 1.40.

Market Overview – What We Think:

  • While all indexes made small gains Monday, it remains to be seen if strength will prove to be a reflex bounce into short-term high or continuation of short-term rally following October 9 lows (1646.47—S&P 500). New highs in all will be determinant.
  • Lacking new highs, odds are increasing broad market is working on short-term top. Increasing volume on weakness and near-term “Overbought” price-based oscillators underscore topping action supposition.
  • Coupled with fact Daily MAAD peaked back on October 22 with indicator refusing to make new highs with prices since then, there is suggestion Smart Money has been selling into strength for better part of past few weeks even though Daily MAAD had been cheerleader for uptrend since last November.
  • While it would only take another 3 positive issues to push MAAD to new high, until such that action develops, negative divergence remains intact. Ongoing failure could create bigger problems of next larger Intermediate Cycle, especially if Daily MAAD fractures year-old uptrend line on downside.
  • With CPFL, and despite strength since October 9, there is still larger statistical overhang in CPFL referenced to June 11 high that remains nearly 50% above current levels.

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.

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