Marginally more selling seen in negative minor trend

MAAD & CPFL Report

 

Market Snapshot for session ending 12-17-13
 

Last

Net Chg

%Change

S&P 500 Index

1781.00

-5.54

-.31%

Dow Jones Industrials

15875.26

-9.31

-.06%

NASDAQ Composite

4023.68

-5.83

-.14%

Value Line Index

4211.51

-3.17

-.08%

Russell 2000

1118.89

-.96

-.09%

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:

  • Small losses surfaced in major indexes Tuesday. Short-term trend remains negative.
  • Market volume decreased 4%.
  • To give market more positive tone, S&P 500 must rally above upper edge of 10-Day Price Channel (1804.77 through Wednesday). Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1721.74 through December 20).
  • Market volatility diminished somewhat Tuesday when our VIX-based volatility indicator, VBVI, declined to 34.57% from Monday’s 36.72%. But indicator is not yet “Oversold.” Declining volatility in VBVI is usually bearish for market. Indicator remains “Overbought” on larger Intermediate Cycle (90.98%) and continues to move lower to suggest ongoing short-term vulnerability.
  • Daily MAAD was even Tuesday with 10 issues positive and 10 negative. Indicator was last just above uptrend line stretching back to November 2012. Resumption of selling could cause a fracture of that year-old uptrend line. Indicator made new high November 29. Daily MAAD Ratio was last “Neutral” at 1.07.
  • Daily CPFL was negative by 1.43 to 1 Tuesday. Indicator hit short-term high December 9 and best level since October 9. Daily CPFL 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 “Neutral” at .99.

Market Overview – What We Think:

  • Marginal market weakness Tuesday simply underscored current negativity on short-term trend. What now remains to be seen is how much more weakness will develop and how that selling might affect larger Intermediate Cycle in effect since November 2012.
  • If more selling occurs, last Thursday’s S&P 500 intraday low (1772.28) could soon be erased. If not, we would first need to see strength above upper edge of 10-Day Price Channel and then new highs to suggest resumption of Intermediate and Major Cycle uptrends.
  • In other words, extent to which any additional near-term selling develops will determine staying power of larger trends. Since Trading Oscillators and Momentum are not yet “Oversold” on Minor Cycle, more weakness should not be ruled out. But with larger trends still positive, we cannot rule out possibility this pullback could prove just one more corrective phase in bull trend.
  • It is important to note that time used on trend since November 2012 is way beyond historical norm for “Intermediate Cycle” (usually several weeks to several months), but since uptrend has remained intact, we will continue to identify it as an “Intermediate” move, as opposed to a Major Cycle advance like the one that began in March 2009.

Index Price Channel Stops (10-Bar MAs of Highs/Lows ) Weekly Monthly
 

12/16

12/17

12/18

12/19

12/20

12/20

12/31

S&P 500 Index

BUY 1804.82

BUY 1805.31

BUY 1804.77

BUY 1800.71

BUY 1796.72

SELL 1721.74

SELL 1525.71

Dow Jones Industrials

BUY 16028.50

BUY 16023.74

BUY 16014.66

BUY 15980.15

BUY 15940.92

SELL 15341.00

SELL 14176.10

NASDAQ Composite

BUY 4059.61

BUY 4063.70

BUY 4064.95

BUY 4056.13

BUY 4048.61

SELL 3822.90

SELL 3205.62

Value Line Index

BUY 4265.47

BUY 4263.33

BUY 4256.52

BUY 4240.75

BUY 4227.81

SELL 4067.11

SELL 3444.08

Russell 2000

BUY 1134.24

BUY 1133.54

BUY 1130.91

BUY 1126.06

BUY 1122.25

SELL 1078.71

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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