More index highs also create new short-term extremes

MAAD & CPFL Report

 

Market Snapshot for session ending 12-26-13
 

Last

Net Chg

%Change

S&P 500 Index

1842.02

+8.70

+.47%

Dow Jones Industrials

16479.88

+122.33

+.75%

NASDAQ Composite

4167.17

+11.76

+.28%

Value Line Index

4357.63

+6.77

+.15%

Russell 2000

1162.65

+.85

+.07%

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:

  • All major indexes rallied to new closing highs Thursday, but buying bias was toward bluer chips. Dow 30 was big gainer on day, up .75%.
  • Despite full day session and 45% increase in activity vs. Tuesday’s early close, overall market volume remains sub par and probably will not return to normal for several days into New Year.
  • S&P 500 remains positive on Minor Cycle and must close below lower edge of 10-Day Price Channel (1786.62 through Friday) to suggest more negative near-term tone. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1734.97 through December 27).
  • Our VIX-based volatility indicator, VBVI, is now toward “Overbought” territory with reading of 89.39%. Indicator remains "Overbought” on larger Intermediate Cycle (94.30%).
  • Daily MAAD rallied to new high Thursday with 13 issues positive and 7 negative. Plot was best level since March 2009 bull market low. Indicator holds above uptrend line stretching back to November 2012. Daily MAAD Ratio was last “Overbought” at 1.67.
  • Daily CPFL was positive by 2.40 to 1 Thursday and moved to highest point since October 9 short-term low. But indicator continues to rest well 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 moderately “Overbought” at 1.45.

Market Overview – What We Think:

  • With more buying Thursday simply re-asserting short-term positive within context of still positive Intermediate and Major Cycle uptrends, burden of proof continues to rest with bears who have yet to put in any meaningful appearance. That has been case since longer-term intermediate uptrend was initiated in November 2012.
  • And underscoring bearish failure is fact that while larger Intermediate and Major Cycle trends have remained “Overbought” for many months, while short-term trend is now re-approaching such levels, Minor Cycle overheated readings over past year have not morphed into anything more than brief, near-term corrective action.
  • That kind of trending will inevitably change. But first, near-term selling must develop to extent pricing and indicators hint that more market weakness on new short-term negative will be forthcoming. That action could then affect larger Intermediate Cycle and possibly Major Cycle advance underway for nearly five years.
  • Nonetheless, for now all cycle remain positive, there is little to do but watch and wait until market creates shift that will indicate selling on strength rather than buying on weakness is most prudent course of action.

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

12/23

12/24

12/25

12/26

12/27

12/27

12/31

S&P 500 Index

SELL 1782.85

SELL 1781.43

SELL 1778.55

SELL 1781.94

SELL 1786.62

SELL 1734.97

SELL 1525.71

Dow Jones Industrials

SELL 15809.96

SELL 15811.50

SELL 15808.46

SELL 15861.94

SELL 15920.11

SELL 15454.46

SELL 14176.10

NASDAQ Composite

SELL 4018.11

SELL 4016.25

SELL 4008.76

SELL 4013.69

SELL 4021.77

SELL 3846.28

SELL 3205.62

Value Line Index

SELL 4188.63

SELL 4187.41

SELL 4185.35

SELL 4193.78

SELL 4203.17

SELL 4091.97

SELL 3444.08

Russell 2000

SELL 1110.37

SELL 1110.19

SELL 1110.04

SELL 1112.23

SELL 1114.81

SELL 1083.63

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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