Stock market ends week below Nov. 29 highs -- harbinger or opportunity?

Weekly Review: MAAD & CPFL Analysis

 

Market Snapshot:
 

Last

Week Chg

Week %Chg

S&P 500 Index

1805.09

-.72

-.03%

Dow Jones Industrials

16020.20

-66.21

-.41%

NASDAQ Composite

4062.52

+2.63

+.06%

Value Line Index

4247.93

-25.65

-.60%

Russell 2000

1131.38

-11.51

-1.00%

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

The stock market returned to relative “normal” last week, as compared to the truncated low volume sessions of the Thanksgiving holiday the previous week. Pricing finished mixed after five sessions and the short-term trend that has been underway since the October 9 lows is in flux once again. After peaking November 29 (1813.55—S&P 500), there was a downward drift in all of the majors that resulted in bigger net losses in the S&P 500 and the Dow 30 to the extent the bluer chips were on the verge of a confirmed short-term, negative reversal. But the less blue NASDAQ Composite, Value Line, and Russell 2000 indexes resisted. Then all began moving higher last Wednesday with Friday’s strong rally capping the week.

What the current action spells out is that the major indexes could easily turn negative on the Minor Cycle with only marginally more selling, but at the same time another bout of buying could put all within reach of new highs. Underscoring market uncertainty, short-term Momentum was about even in the S&P 500 and the Dow and a little bit more positive in COMPX, VALUA, and TFY. At the same time, while our Daily Most Actives Advance/Decline Line (MAAD) has been failing since it too made a new high November 29, the indicator remains above an uptrend line stretching back to the lows made November 16, 2012. That year-old trendline is the downside “failsafe” point for Daily MAAD.

Long-term upside “Measured Move” targets as calculated from March 2009 bear lows

 

Recent High

Upside Target

Diff / 12-6

Diff / 9-27

S&P 500

1813.55

1778

+1.52%

-2.7%

Dow 30

16174.51

16810

-4.60%

-6.5%

NASDAQ Comp.

4069.70

4025

+.93%

-5.6%

Value Line

4311.00

4410

-3.67%

-7.8%

Russell 2000

1147.00

1160

-2.46%

-6.7%

12/6 Average: -1.65% -5.86%

11/29 Average: -.80% -5.86%

It’s also true that to suggest a longer-term top in the broad market, we would like to see the development of a negative divergence between MAAD and pricing. That has not yet occurred. In fact, the last significant Daily MAAD divergence that developed was prior to the May/October 2011 pullback in the long-term uptrend. That correction saw the S&P 500 lose nearly 22% over almost five months with Daily MAAD peaking March 3, 2011 and two months before the S&P put in a final intermediate high May 2 via intraday action to 1370.58. Over the past year Daily MAAD has been a cheer leader for higher prices while suggesting Smart Money has liked the market, net.  While the indicator has been less “enthusiastic” than pricing during the recent rally and since the October 9 lows, it has nonetheless remained trend friendly and has moved to new highs before or with the market.

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