Major stock indexes mixed Monday, as key indicator falters

MAAD & CPFL Review

 

Market Snapshot for session ending 11-25-13
 

Last

Net Chg

%Change

S&P 500 Index

1802.48

-2.28

-.13%

Dow Jones Industrials

16072.54

+7.77

+.05%

NASDAQ Composite

3994.57

+2.92

+.07%

Value Line Index

4236.95

-2.73

-.06%

Russell 2000

1124.72

-.20

-.02%

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:

  • All five major indexes we follow rallied to new highs on intraday basis Monday, but only two, Dow 30 and NASDAQ Composite, were able to close at new highs. S&P 500, Value Line Index, and Russell 2000 all registered small losses.
  • Market volume rose 4%. Expect activity to drop over remainder of week as many players hit the road for the holiday.
  • S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1775.86 through Tuesday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1681.85 through November 29).
  • VBVI, our VIX-based volatility indicator, backed off slightly Monday to 93.56%, but nevertheless remains “Overbought” on Minor Cycle. Lowest recent level was hit October 9 (26.29%).
  • Daily MAAD was negative by 9 to 11 Monday and remains below November 15 new high. Negative divergence between Daily MAAD and S&P 500 that made new highs recently is in effect. Daily MAAD nonetheless remains above uptrend line stretching back to November 2012.
  • Daily CPFL was positive by 2.39 to 1 Monday and hit new short-term high, But indicator remains below June 11 short to intermediate-term high, uptrend line stretching back to October 2011, and major resistance peak made February 2011.

Market Overview – What We Think:

  • While negative divergence between Daily MAAD and S&P 500 is small, there is nevertheless a negative divergence in effect to extent Daily MAAD peaked November 15 and has not confirmed new recent highs in S&P.
  • One of two things will happen. Either Daily MAAD gets in synch with S&P on upside by making new highs, or S&P follows lead of Daily MAAD and moves lower. If the former, the uptrend persists. If the latter, the short-term uptrend begun October 9 would be in jeopardy.
  • In the meantime, the trend is still the investor’s friend, but if more gains follow, they will do so from already “Overbought” price-based statistics including 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 strength become increasingly important.

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

11/25

11/26

11/27

11/28

11/29

11/29

11/30

S&P 500 Index

SELL 1772.52

SELL 1775.86

SELL 1777.31

SELL 1779.67

SELL 1783.38

SELL 1681.85

SELL 1500.00

Dow Jones Industrials

SELL 15767.10

SELL 15810.50

SELL 15831.98

SELL 15856.91

SELL 15888.40

SELL 15070.17

SELL 13944.86

NASDAQ Composite

SELL 3923.11

SELL 3925.15

SELL 3924.78

SELL 3829.17

SELL 3938.65

SELL 3733.99

SELL 3145.05

Value Line Index

SELL 4167.28

SELL 4170.48

SELL 4171.44

SELL 4174.03

SELL 4183.98

SELL 3978.73

SELL 3358.97

Russell 2000

SELL 1099.15

SELL 1099.42

SELL 1099.49

SELL 1100.83

SELL 1104.3

SELL 1060.45

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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