Stock indexes fade Tuesday, threaten short-term negativity

MAAD & CPFL Review


Market Snapshot for session ending 12-10-13


Net Chg


S&P 500 Index




Dow Jones Industrials




NASDAQ Composite




Value Line Index




Russell 2000




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.

Market Overview – What We Know:

  • Major indexes succumbed to marginal profit-taking Tuesday. While S&P 500 and Dow 30 remain relatively trend “Neutral,” Value Line and Russell 2000 indexes are on verge of short-term negativity. NASDAQ Composite remains strongest of majors.
  • Market volume rose 2.2% on weakness.
  • To break out of “Neutral” range, S&P 500 needs to either rally above upper edge of 10-Day Price Channel (1805.50 through Wednesday) or below lower edge of 10-Day Channel (1793.62 through Wednesday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1709.21 through December 13).
  • Our VIX-based volatility indicator, VBVI, rose slightly Tuesday to 78.01% from Monday’s 76.93%. Declining volatility in VBVI is usually bearish for market. Indicator remains “Overbought” on larger Intermediate Cycle (96.50%).
  • Daily MAAD was slightly lower Tuesday with 9 issues positive and 11 negative. Indicator was last just 3 positive issues from equaling its November 29 high and point that must be surpassed for Daily MAAD to reach best level since March 2009. Daily MAAD remains above uptrend line stretching back to last November’s lows. Daily MAAD Ratio was last into lower ranges of “Overbought” territory at 1.18.
  • Daily CPFL was negative by 1.98 to 1 Tuesday after rallying to short-term high Monday and best level since October 9. But indicator remains below June 11 short to intermediate-term peak, rising uptrend line stretching back to October 2011, and major resistance high made February 25, 2011. Daily CPFL was last “Overbought” at 1.49.

Market Overview – What We Think:

  • While market’s inability to muster any upside follow-through Tuesday after S&P and COMPX eked out new closing highs Monday is suspicious, we would like to see all indexes get in synch on downside to suggest an end to short-term uptrend begun October 9.
  • Lacking such action, even in face of developing negativity in VALUA and TFY, we must regard any pullback as brief corrective action in larger cycle positive.
  • So long as short-term trend remains in limbo, Intermediate Cycle begun over year ago remains intact. Or, at most it has yet to be seriously threatened.
  • What remains to be seen is if there is going to be any upside follow-through in face of near-term “Overbought” conditions, failed short-term Momentum, and Cumulative Volume (CV) variances, as reflected in S&P 500 Emini futures.
  • Hanging in balance, as determined by how Minor Cycle plays out in upcoming sessions, will be fate of larger Intermediate Cycle that has remained positive for months. That larger trend may not give up easily, as has been case for over a year.

Index Price Channel Stops (10-Bar MAs of Highs/Lows )  Weekly  Monthly
   12/9 12/10  12/11 12/12 12/13 12/13  12/31 

S&P 500 Index

BUY 1807.08

BUY 1806.30

BUY 1805.50

BUY 1803.36

BUY 1803.68

SELL 1709.21

SELL 1525.71

Dow Jones Industrials

BUY 16099.18

BUY 16086.07

BUY 16065.36

BUY 16034.17

BUY 16028.12

SELL 15246.44

SELL 14176.10

NASDAQ Composite

SELL 4001.52

SELL 4009.46

SELL 4012.80

SELL 4018.40

SELL 4025.03

SELL 3796.20

SELL 3205.62

Value Line Index

SELL 4231.58

SELL 4233.31

BUY 4269.71

BUY 4267.08

BUY 4265.90

SELL 4038.92

SELL 3444.08

Russell 2000

SELL 1124.32

SELL 1124.76

BUY 1134.62

BUY 1133.67

BUY 1134.26

SELL 1072.43

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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