Still positive short-term trend gains negative traction

* Cycle status is based on S&P 500.

Market Overview – What We Know:

• Negative tone of stock market gained somewhat more traction Wednesday when all of major indexes once again ended in minus territory. Dow 30 was biggest relative loser 
• (-.41%).
• Market volume rose a little under 1%.
• S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1762.52 through Thursday). 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, was last plotted at 88.67%, down just .25 from Tuesday’s 88.92%. Monday’s high at 98.48% was highest level since October 9 low (94.18%).
• Daily MAAD was negative again Wednesday with 6 issues higher, 13 lower, and one unchanged. Indicator made new high and reached best level since March 2009 last Friday. Daily MAAD remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last heading toward “Neutral” (1.12%).
• Daily CPFL was fractionally negative Wednesday after rallying to best level since October 9 short-term low on Monday. Indicator remains 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 1.20%.

Market Overview – What We Think:

• It remains to be seen if marginal net selling in major indexes over past few sessions will prove to be beginning of short-term reversal, or mere pull back in Minor Cycle advance begun October 9. Given near-term “Overbought” price-based oscillators, we are drifting more toward first option.
• Selling in face of upside failure in short-term Momentum, near “Overbought” conditions in VBVI, and fact Daily MAAD has been anemic into price strength recently could mean Minor Cycle positive is on borrowed time.
• 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. But until confirmed short-term reversal develops, burden of proof still rests with bears.
• Until pricing breaks below lower edges of 10-Day Price Channels, however, Minor Cycle uptrend initiated October 9 will remain intact.

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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About the Author

Robert McCurtain is a technical analyst/market timer, private investor and financial markets consultant based in New York City. He can be reached at traderbob@nyc.rr.com.

If you would like to read more about how the CPFL is constructed, read a Futures article on the concept. This link will take you to the MAAD article. A two-part series about system development with the MAAD also is available.