Market fragile in wake of Wednesday’s sharp gains

MAAD & CPFL Report

 

Market Snapshot for session ending 12-19-13
 

Last

Net Chg

%Change

S&P 500 Index

1809.60

-1.05

-.06%

Dow Jones Industrials

16179.08

+11.11

+.07%

NASDAQ Composite

4058.13

-11.92

-.29%

Value Line Index

4247.66

-14.75

-.35%

Russell 2000

1125.45

-8.28

-.73%

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

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:

  • On heels of Wednesday’s sharp rally, major indexes closed mixed Thursday.
  • Market volume backed off more than 19%.
  • S&P 500, back above upper edge of 10-Day Price Channel, has shallow toehold in positive territory, but any decline below lower edge of 10-Day Price Channel (1784.58 through Friday) would suggest more negative tone on short-term trend. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1721.74 through December 20).
  • Our VIX-based volatility indicator, VBVI, rose to 66.94% Thursday from 56.04% reading made Wednesday. Indicator remains “Overbought” on larger Intermediate Cycle (90.98%).
  • Daily MAAD was negative by 5 to 15 Thursday. remains below new high made November 29, and could sink below uptrend line stretching back to November 2012 with relative ease. Daily MAAD Ratio was last marginally “Overbought” at 1.13.
  • Daily CPFL was positive by 1.93 to 1 Thursday. Indicator hit short-term high December 9 and best level since October 9, 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 .97.

Market Overview – What We Think:

  • Gains made by indexes Wednesday were impressive, but while all of majors eked out positive signals relative to 10-Day Price Channels, all strength this side of new highs will prove to be futile gesture. In short, there must be upside follow through to re-assert bull trend begun in March 2009 or case could be made Intermediate Cycle top is building.
  • Adding to market’s near-term quandary, of major indexes we follow only Dow 30 pushed to slightly higher new high Thursday while none of major indexes followed suit. Lacking sustained buying and despite new high in Dow 30, flip side of Wednesday’s rally is that gains were merely a short-covering rally.
  • Wednesday’s upside pop was nothing new if it turns out buying will be followed by new highs. In meantime there is little to do but watch and wait until market shifts from buying on weakness to selling on strength.

 

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

SELL 1787.80

SELL 1784.58

SELL 1721.74

SELL 1525.71

Dow Jones Industrials

BUY 16028.50

BUY 16023.74

BUY 16014.66

SELL 15857.12

SELL 15826.51

SELL 15341.00

SELL 14176.10

NASDAQ Composite

BUY 4059.61

BUY 4063.70

BUY 4064.95

SELL 4025.92

SELL 4019.00

SELL 3822.90

SELL 3205.62

Value Line Index

BUY 4265.47

BUY 4263.33

BUY 4256.52

SELL 4216.82

SELL 4193.83

SELL 4067.11

SELL 3444.08

Russell 2000

BUY 1134.24

BUY 1133.54

BUY 1130.91

SELL 1114.02

SELL 1110.72

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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