Indexes rally early Monday, fade, when sellers step in

MAAD & CPFL Review

 

Market Snapshot for session ending 11-18-13
 

Last

Net Chg

%Change

S&P 500 Index

1791.53

-6.65

-.37%

Dow Jones Industrials

15976.02

+14.31

+.09%

NASDAQ Composite

3949.06

-36.90

-.93%

Value Line Index

4205.50

-25.18

-.59%

Russell 2000

1107.29

-8.91

-.80%

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

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 rallied to new highs on intraday basis early Monday. But once intraday highs were reached just after opening, sellers appeared. Weakness accelerated after 2 pm and most majors closed toward day’s lows. Only Dow 30 closed at marginal new high, despite fade.
  • Market volume declined 6.1%.
  • S&P 500 remains positive on Minor Cycle and must sell below lower edge of 10-Day Price Channel (1757.75 through Tuesday) to suggest new short-term negative. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1667.17 through November 22).
  • VBVI, our VIX-based volatility indicator, backed off from its most “Overbought” reading (98.48%) Monday and since October 9 low (94.18%).
  • Daily MAAD was net negative Monday with 6 issues higher and 14 lower. Indicator made new high and reached best level since March 2009 last Friday. While Daily MAAD “strength” over past several weeks has been anemic, it remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last into lower reaches of “Overbought” territory at 1.34%.
  • Daily CPFL was positive Friday by 1.59 to 1 and rallied to best level since October 9 short-term low. Indicator nonetheless 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 1.41%.

Market Overview – What We Think:

  • Sellers were waiting Monday as major indexes rallied to new highs. Selling in face of “Overbought” short-term price readings, upside failure in short-term Momentum, “Overbought” conditions in VBVI, and fact Daily MAAD has been anemic into price strength recently could mean Minor Cycle positive is on borrowed time.
  • Additional fact that COMPX, VALUA, and TFY were net negative Monday after TFY failed to make new high with other indexes last week is also indication lesser blue chips have lost some of their recent steam.
  • This move to new highs by 80% of indexes last week was bullish to extent prices rallied, but we know this short-term uptrend begun after October 9 lows has been exhibiting signs of vulnerability. Nevertheless, until confirmed short-term reversal develops, burden of proof still rests with bears.

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

11/18

11/19

11/20

11/21

11/22

11/22

11/30

S&P 500 Index

SELL 1756.82

SELL 1757.75

SELL 1758.39

SELL 1762.52

SELL 1768.11

SELL 1667.17

SELL 1500.00

Dow Jones Industrials

SELL 15605.12

SELL 15627.05

SELL 15639.90

SELL 15674.03

SELL 15717.57

SELL 15000.53

SELL 13944.86

NASDAQ Composite

SELL 3896.89

SELL 3896.53

SELL 3896.15

SELL 3905.16

SELL 3917.13

SELL 3672.28

SELL 3145.05

Value Line Index

SELL 4133.34

SELL 4134.68

SELL 4136.24

SELL 4145.73

SELL 4158.40

SELL 3936.08

SELL 3358.97

Russell 2000

SELL 1091.45

SELL 1091.49

SELL 1091.94

SELL 1094.34

SELL 1097.36

SELL 1048.26

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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