Market pulls back Monday, but short-term still positive

MAAD & CPFL Review

 

Market Snapshot for session ending 12-02-13
 

Last

Net Chg

%Change

S&P 500 Index

1800.90

-4.91

-.27%

Dow Jones Industrials

16008.77

-77.64

-.48%

NASDAQ Composite

4045.26

-14.62

-.36%

Value Line Index

4265.31

-29.81

-.69%

Russell 2000

1129.12

-13.77

-1.20%

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:

  • Profit taking pushed major indexes marginally lower Monday.
  • Compared to last Friday’s truncated session and lower volume, activity rose Monday by nearly 80%.
  • S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1787.31 through Tuesday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1697.15 through December 6).
  • Our VIX-based volatility indicator, VBVI, pulled back Monday to 83.85% from Friday’s 88.30%, but remains moderately “Overbought.” At October 9 short-term low indicator was plotted at 26.29%. Intermediate Cycle VBVI remains “Overbought” at 99%.
  • Daily MAAD backed off Monday with 6 issues positive, 13 negative, and 1 unchanged. Indicator made new high last Friday and remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last just above “Neutral” at 1.09%.
  • Despite net market weakness Monday, Daily CPFL was positive by 4.11 to 1 Monday and rallied to highest point since October 9 short-term market and indicator lows. 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. Daily CPFL was last “Overbought” at 1.55.

Market Overview – What We Think:

  • General index weakness Monday could prove to be short-lived pull back within context of still positive Minor Cycle uptrend begun October 9. But there is a certain inevitability at play in that short-term advance is nearly two months old and “Overbought” with Momentum having confirmed none of strength since October 25.
  • Bright spots are still positively trending Daily MAAD, despite Monday’s small setback, and fact CPFL was net positive by 4.11 to 1 to suggest buyers liked Calls on a Dollar Value basis in face of index weakness..
  • With new high last week in Daily MAAD, we look forward to a new 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. But if more gains and hew highs follow, they will do so from already “Overbought” price-based statistics.
  • Movement to new highs based on price would be apparently bullish simply because prices are making new highs and action would become a self-fulfilling prophecy. But reality is, short-term advance begun October 9 is beginning to look long in tooth.

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

12/2

12/3

12/4

12/5

12/6

12/6

12/31

S&P 500 Index

SELL 1783.38

SELL 1787.31

SELL 1790.68

SELL 1793.71

SELL 1796.19

SELL 1697.15

SELL 1525.71

Dow Jones Industrials

SELL 15888.40

SELL 15927.07

SELL 15962.76

SELL 15969.40

SELL 16012.08

SELL 15165.26

SELL 14176.10

NASDAQ Composite

SELL 3938.65

SELL 3948.61

SELL 3957.90

SELL 3971.62

SELL 3988.86

SELL 3772.43

SELL 3205.62

Value Line Index

SELL 4183.98

SELL 4194.09

SELL 4203.23

SELL 4213.56

SELL 4229.66

SELL 4013.80

SELL 3444.08

Russell 2000

SELL 1104.30

SELL 1108.09

SELL 1111.73

SELL 1116.49

SELL 1122.09

SELL 1067.84

SELL 909.73

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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