Stocks' familiar story: New highs with some divergencies

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1804.76

+6.58

+.36%

Dow Jones Industrials

16064.77

+103.07

+.64%

NASDAQ Composite

3991.64

+5.68

+.14%

Value Line Index

4239.88

+9.20

+.21%

Russell 2000

1124.92

+8.72

+.78%

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

While there is a large segment of the investment community that would not touch an investment unless they could analyze its earnings, share of market, the strength of a company’s management team, and so on, and views the analysis of price action in a stock or a market index as nothing short of alchemy, we tend to take a different view. While we do not intend to debate analytical approaches in the lines that follow, we do believe that no matter what the approach, if an investor is unable to buy and then sell profitably, whatever the approach, it is useless. Even Merlin the Magician would likely be unable to change that outcome. And because we have learned the hard way a number of times that price is the ultimate arbiter in all market conflicts, we see no reason to doubt that market truth will change any time soon.

Last week was no exception to the rule that “price counts.” In fact, for over two years following the May/October 2011 correction, and the worst downdraft of the bull trend that began in March 2009, prices have been moving inexorably higher. There were two modest, or Intermediate Cycle, pull backs in the wake of that October 2011 low, the last of which was followed by an advance that has been underway since November 16, 2012. The current year-old rally has consisted of seven short-term lows by our count. The last that began on October 9 included two small hesitations, the most recent of which was followed last week by new closing highs in all of the five major indexes we follow.

Long-term upside “Measured Move” targets as calculated from March 2009 bear lows

 

Recent High

Upside Target

Diff / 11-22

Diff / 9-27

S&P 500

1804.84

1778

+1.50%

-2.7%

Dow 30

16068.78

16810

-4.41%

-6.5%

NASDAQ Comp.

3994.96

4025

-.74%

-5.6%

Value Line

4242.09

4410

-3.80%

-7.8%

Russell 2000

1125.64

1160

-2.96%

-6.7%

Average: -2.08% -5.86%

But there is an absolute certainty about this uptrend, as has been the case with all bull markets that have come before -- it will end. We know that reports of the demise of this bull market, just like the death of Mark Twain, have been greatly exaggerated. And while we have thought on occasion the longer-term trend might roll over to at least correct some of its upside excesses on the Intermediate Cycle, such a trend that can last for months. The truth is, the last time this bull market suffered to any degree was during the May/October 2011 correction when the S&P 500 lost nearly 22%.

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