Technical market consolidation -- Precedent to new highs or turn lower?

MAAD & CPFL Review

 

Market Snapshot for session ending 11-12-13
 

Last

Net Chg

%Change

S&P 500 Index

1767.69

-4.20

-.24%

Dow Jones Industrials

15750.67

-32.42

-.21%

NASDAQ Composite

3919.92

+.13

00%

Value Line Index

4164.63

-2.01

-.04%

Russell 2000

1101.47

-03

00%

Minor Cycle* (Short-term trend lasting days to a few weeks) 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:

  • Mixed readings with a slightly downward bias were registered by major indexes Tuesday.
  • Market volume rose 14.4% compared to Monday’s light holiday activity.
  • S&P 500 must sell below lower edge of 10-Day Price Channel (1758.23 through Wednesday) to suggest new Minor Cycle negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1661.15 through November 15).
  • VBVI, our VIX-based volatility indicator, moved to new “Overbought” high Tuesday (97.09%) and highest level since October 9 low.
  • Daily MAAD was slightly negative Tuesday with 9 issues higher and 11 lower. Indicator made new high last Friday and best level since March 2009, but indicator “strength” prior to that point was anemic. Daily MAAD remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was “Neutral” at 1.03%.
  • Daily CPFL was negative Tuesday by 1.16 to 1 after hitting new short-term high and best level since October 9 on November 6. 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 “Neutral” at 1.06%.

Market Overview – What We Think:

  • Depending on index, majors have been in consolidative mode for better part of past few weeks. We have been assuming that movement could be precedent to new short-term negative that could carry index pricing lower.
  • But there is a caveat. Given Daily Ratio status of MAAD, CPFL, and short-term Momentum, all of which have returned to “Neutral” levels, we cannot rule out possibility generally lateral action over past few weeks in indexes could be preliminary to resumption of uptrend. Buying in bellwether S&P 500 to new high (above October 30 intraday high at 1775.22) could be sign of uptrend resumption. All of other indexes would have to then confirm with similar new highs.
  • If more bullish scenario does not unfold, weakness back below low edges of defined 10-Day Price Channel lows would cause us to revert to our original supposition market might be about to enter into near-term corrective phase. In other words, nothing but new highs in all indexes and Daily MAAD would erase bearish short-term possibilities.
  • Given fact that Daily MAAD has not been a harbinger of market weakness at this point, odds may be increasing that burden of proof is on bears.

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

11/11

11/12

11/13

11/14

11/15

11/15

11/30

S&P 500 Index

SELL 1755.93

SELL 1756.38

SELL 1758.23

SELL 1756.34

SELL 1754.70

SELL 1661.15

SELL 1500.00

Dow Jones Industrials

SELL 15539.54

SELL 15542.77

SELL 15563.05

SELL 15570.84

SELL 15574.23

SELL 14975.85

SELL 13944.86

NASDAQ Composite

BUY 3946.23

BUY 3946.72

BUY 3948.81

BUY 3946.88

BUY 3941.37

SELL 3672.28

SELL 3145.05

Value Line Index

BUY 4183.50

BUY 4183.67

BU 4184.86

BUY 4183.76

BUY 4178.92

SELL 3911.47

SELL 3358.97

Russell 2000

BUY 1113.80

BUY 1112.00

BUY 1111.16

BUY 1109.27

BUY 1107.20

SELL 1040.69

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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