New highs on low volume, with key indicator still rising

MAAD & CPFL Review

 

Market Snapshot for session ending 11-27-13
 

Last

Net Chg

%Change

S&P 500 Index

1807.23

+4.48

+.25%

Dow Jones Industrials

16097.33

+24.53

+.15%

NASDAQ Composite

4044.75

+27.00

+.67%

Value Line Index

4270.99

+20.61

+.49%

Russell 2000

1141.33

+6.80

+.60%

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:

  • Pre-holiday trading on less activity pushed major indexes to new highs Wednesday.
  • Market volume declined 23.3%.
  • S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1783.38 through Friday). 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, pulled back Wednesday to 91.40%, but remains “Overbought.” At October 9 short-term lower indicator was plotted at 26.29%.
  • Daily MAAD rallied to new high Wednesday with 15 issues higher, 4 lower, and 1 unchanged. Indicator bettered November 15 new high. Daily MAAD remains above uptrend line stretching back to November 2012.
  • Daily CPFL was positive by 1.19 to 1 Wednesday and hit new short-term high. But indicator remains below June 11 short to intermediate-term peak, uptrend line stretching back to October 2011, and major resistance high made February 25, 2011.

Market Overview – What We Think:

  • New high in Daily MAAD Wednesday simply underscored trend that has been in place for over a year in indicator and effectively validated new highs recently made in all of major indexes.
  • Once again we look forward to a negative divergence between Daily MAAD and major indexes to suggest at least an intermediate-term high. While such a disparity isn’t a sure thing, most important tops have usually been preceded by a negative divergence in MAAD.
  • In meantime, trend is still investor’s friend. If more gains and hew highs follow, they will do so from already “Overbought” price-based statistics including short-term Momentum statistics that have little chance of making new highs with prices. In fact, short-term Momentum in 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 and becomes something of a self-fulfilling prophecy. But truth is, short-term advance that began October 9 is beginning to look a bit long in tooth.

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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