Stock indexes sink Thursday, likely finishing short-term uptrend

MAAD & CPFL Review

 

Market Snapshot for session ending 11-7-13
 

Last

Day Change

%Change

S&P 500 Index

1747.15

-23.34

-1.32%

Dow Jones Industrials

15593.98

-152.89

-.97%

NASDAQ Composite

3857.33

-74.61

-1.90%

Value Line Index

4099.78

-67.22

-1.61%

Russell 2000

1079.09

-19.54

-1.78%

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

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 took big hit Thursday with all closing negatively. S&P 500, NASDAQ Composite, and Value Line and Russell 2000 indexes are now signaling new negatives on Minor Cycle. Only Dow 30 remains short-term positive.
  • Market volume increased 19.7%, as prices declined.
  • With movement below lower edge of 10-Day Price Channel (1753.46 on Thursday), S&P 500 has signaled an end to short-term advance begun October 9. To take on more positive tone, bellwether must now rally above upper edge of 10-Day Price Channel (1765.60 through Friday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1664.08 through November 8).
  • VBVI, our VIX-based volatility indicator, moved lower Thursday to 93.06% from Wednesday’s 96.81%. Indicator is still “Overbought” short-term. At September 19 short-term high VBVI peaked at 92.4%.
  • Daily MAAD was negative Thursday with 4 issues higher and 16 lower. Indicator made fractionally higher new high Tuesday and hit best level since March 2009. Daily MAAD remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last toward “Neutral” at 1.06.
  • Daily CPFL was negative by 1.41 to 1 Thursday after hitting new short-term high and best level since October 9 on Wednesday. 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 marginally “Overbought” at 1.15.

Market Overview – What We Think:

  • The short-term advance begun after October 9 lows (1646.47—S&P 500) is probably over. Given ironic fact recently lagging Dow 30 is only major index of five we follow still positive relative to Minor Cycle uptrend, odds are good the 30 will also soon capitulate.
  • Given additional fact NASDAQ, and especially TFY that has taken a major drubbing over past several days, look weak on charts along with VALUA, further short-term weakness could follow.
  • We are disappointed, however, that Daily MAAD after squeaking out a slightly higher high on Tuesday has hardly been a harbinger of market weakness if it turns out further selling is going to follow. One way to interpret Daily MAAD reluctance, however, would be to suggest no serious selling will develop. That’s possible, but at some point such a supposition could prove to be wishful thinking, given maturity of larger Intermediate Cycle. So it will be interesting to see how Daily MAAD plays out from here on.
  • And then there is Daily CPFL that, despite strength for the past month coincident with short-term rally in pricing, remains in longer-term downtrend while holding nearly 50% below June 11 short to intermediate high in indicator. That longer-term negative divergence is bearish.

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

BUY 1765.60

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

BUY 3947.40

SELL 3671.35

SELL 3145.05

Value Line Index

SELL 4139.47

SELL 4151.05

SELL 4155.07

SELL 4154.80

BUY 4182.61

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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