Stock market minor cycle uptrend begun Oct. 9 is probably over

MAAD & CPFL Review

 

Market Snapshot for session ending 12-04-13
 

Last

Net Chg

%Change

S&P 500 Index

1792.81

-2.34

-.13%

Dow Jones Industrials

15889.77

-24.85

-.16%

NASDAQ Composite

4038.00

+.80

+.02%

Value Line Index

4240.95

-7.75

-.18%

Russell 2000

1121.38

-2.43

-.22%

Minor Cycle* (Short-term trend lasting days to a few weeks) Neutral / Negative

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 trended lower Wednesday with only exception being NASDAQ Composite that was up fractionally. Short-term trend is negatively challenged in all issues.
  • Market volume declined 2.6%.
  • S&P 500 remains positive on Minor Cycle until lower edge of 10-Day Price Channel (1793.71 through Thursday), but pricing in bellwether is rapidly closing in on downside failsafe level. 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, declined Wednesday to 72.05% from Tuesday’s 75.76%. Declining volatility in VBVI is usually bearish for market. Indicator remains moderately overheated. At October 9 short-term low VBVI was plotted at 26.29%. Intermediate Cycle VBVI remains “Overbought” at 99%.
  • Daily MAAD was slightly positive Wednesday with 11 issues higher and 9 lower. 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 1.12%.
  • Daily CPFL was positive by 1.42 to 1 Wednesday after rallying to highest point since October 9 on Monday. 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 1.54.

Market Overview – What We Think:

  • Initial weakness in major indexes Wednesday with some afternoon recovery nonetheless left all of majors in jeopardy on short-term trend that extends back to October 9 lows (1646.47—S&P 500) to suggest that short-term “Overbought” conditions and failed Momentum are finally beginning to “bite.”
  • What will be large determinant of staying power of Minor Cycle will be ability of index pricing to stay above lower edges of defined 10-Day Price Channels (see Table below). If those levels are breached on downside, odds would be excellent two-month-old uptrend would be over.
  • Larger issue would then shift focus to very mature “Intermediate Cycle” uptrend in effect for over a year.
  • Fact that Daily MAAD is rapidly closing in on uptrend line stretching back to November 2012 is yellow flag. But with new high last week in Daily MAAD, new negative divergence between Daily MAAD and major indexes would be desirable to suggest at least an intermediate-term high.

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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