Negative market pressure persists, as Blue Chips take hit

MAAD & CPFL Review

 

Market Snapshot for session ending 12-05-13
 

Last

Net Chg

%Change

S&P 500 Index

1785.03

-7.78

-.43%

Dow Jones Industrials

15821.51

-68.25

-.43%

NASDAQ Composite

4033.16

-4.83

-.12%

Value Line Index

4234.25

-6.83

-.16%

Russell 2000

1122.47

+1.09

-.10%

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

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:

  • More selling Thursday gave Minor Cycle in major indexes more negative tone. Bluer chip S&P 500 and Dow 30 look weakest with Value Line and Russell 200 indexes coming in third and fourth. NASDAQ Composite that was up slightly yesterday is best performer of five.
  • Market volume declined 3.4% Thursday.
  • S&P 500 appears to be in early stages of Minor Cycle reversal to negative via weakness below lower edge of 10-Day Price Channel. To suggest more favorable tone, bellwether must rally above upper edge of 10-Day Channel (1805.84 through Friday). 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 Thursday to 68.55% from Wednesday’s 72.05%. 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 negative Thursday with 7 issues higher and 13 lower. Indicator made new high November 29. But weakness over past several sessions has caused Daily MAAD to close in on uptrend line stretching back to last November’s lows. Daily MAAD Ratio was last just above “Neutral” at 1.13%.
  • Despite market weakness Thursday, Daily CPFL was positive by 2.29 to 1 Thursday and indicator rallied to new short-term high and highest level since October 9 low. 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 1.70.

Market Overview – What We Think:

  • While there has been obvious evidence of selling pressures across board over past several days, action has had more appearance of a small correction than of a concerted reversal. Nuance may seem to be one of semantics since there are losses, nonetheless. But with variances in weakness between bluer chip indexes and less blue, and fact Daily MAAD remains in uptrend while Daily CPFL made new short-term high Thursday, burden remains on bears to prove their negative point.
  • Hanging in balance, as determined by how much Minor Cycle rolls over in upcoming sessions, will be fate of larger Intermediate Cycle that has remained positive for months. That larger trend may not give up easily.
  • If an intermediate-term high is approaching, we might see index prices scratch our new highs while Daily MAAD does not. That action is historical precursor to a more important market reversal. 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

BUY 1796.19

SELL 1697.15

SELL 1525.71

Dow Jones Industrials

SELL 15888.40

SELL 15927.07

SELL 15962.76

SELL 15969.40

BUY 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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