Market rebounds and new highs cannot be ruled out

MAAD & CPFL Review

 

Market Snapshot for session ending 11-21-13
 

Last

Net Chg

%Change

S&P 500 Index

1795.85

+14.48

+.81%

Dow Jones Industrials

16009.99

+109.16

+.69%

NASDAQ Composite

3969.15

+47.88

+1.22%

Value Line Index

4224.06

+52.37

+1.26%

Russell 2000

1119.62

+19.83

+1.80%

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 rebounded Thursday with Russell 2000 (up 1.80%) posting biggest gain after recent drawdown.
  • Market volume declined a little under 1%, despite strength.
  • S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1768.11 through Friday). 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, moved up to 90.92% Thursday, but remains below highest recent level, 98.48%, reached November 18. That high was highest since October 9 low (26.29%).
  • Daily MAAD was positive by 4 to 1 Thursday, but indicator remains below November 15 new high. Daily MAAD remains above uptrend line stretching back to November 2012. Daily MAAD Ratio rebounded to marginally “Overbought” at 1.43.
  • Daily CPFL was positive by 1.93 to 1 Thursday, but remains below new short-term high made November 18 at highest level since October 9 low. 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 1.32%.

Market Overview – What We Think:

  • Given fact short-term trend was positive before Thursday’s rebound in major indexes, we would not be surprised to see prices make another run at new highs in wake of Thursday’s rebound.
  • In other words, the trend is still the investor’s friend and selling prior to Thursday’s gains may not have been enough to cause the Minor Cycle to roll over to negative.
  • But if more gains follow, they will do so from already “Overbought” price-based statistics with short-term Momentum numbers that have little chance of making new highs with prices. In fact, short-term Momentum in the S&P 500 peaked back on October 25.
  • While movement to new highs based on price would be apparently bullish simply because prices are making new highs, if such action develops the underpinnings of that strength become increasingly important.
  • Underscoring all of this, however, until pricing breaks below lower edges of 10-Day Price Channels, Minor Cycle uptrend initiated October 9 will remain intact.

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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