Minor stock market cycle turns negative, with more selling likely

MAAD & CPFL Report

 

Market Snapshot for session ending 12-11-13
 

Last

Net Chg

%Change

S&P 500 Index

1782.22

-20.40

-1.13%

Dow Jones Industrials

15843.53

-129.59

-.81%

NASDAQ Composite

4003.81

-56.67

-1.40%

Value Line Index

4169.12

-59.48

-1.40%

Russell 2000

1101.50

-18.18

-1.62%

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

  • Sharp losses in major indexes Wednesday almost certainly turned negative short-term uptrend in effect since October 9.
  • Market volume rose more than 10% on weakness.
  • To take on more positive tone, S&P 500 must rally above upper edge of 10-Day Price Channel (1803.36 through Thursday). 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, declined sharply Wednesday to 65.04% from Tuesday’s 78.01%. Declining volatility in VBVI is usually bearish for market. Indicator remains “Overbought” on larger Intermediate Cycle (96.50%).
  • Daily MAAD was negative by 3 to 17 Wednesday and moved lower toward defined uptrend line stretching back to November 2012 low. Indicator made new high November 29. Daily MAAD Ratio was last ”Neutral” at .98.
  • Daily CPFL was sharply negative by 3.8 to 1 Wednesday after rallying to new 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 Ratio was last marginally “Overbought” at 1.18.

Market Overview – What We Think:

  • Now that it appears short-term uptrend in effect since October 9 is over, via sharp losses in all of major indexes Wednesday, extent to which more near-term selling develops will determine staying power of larger Intermediate Cycle positive.
  • Because S&P would presently need to sink nearly 73 points to 1709.21 to fall below lower edge of 10-Week Price Channel, it’s likely more selling on current short-term negative could be followed by :test” of recent highs (1813.55—S&P 500 on November 29).
  • Since short-term Momentum in S&P was “Neutral” as of Wednesday’s close and short-term Trading Oscillators are not yet “Oversold,” given Wednesday’s price breakdown, we would not be surprised to see further net losses develop just ahead. Thereafter, how a rebound develops would determine staying power of larger Intermediate Cycle and whether year-old uptrend is toward end game.

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

BUY 4045.70

BUY 4052.47

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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