Major stock markets decline on more typical volume

MAAD & CPFL Report

 

Market Snapshot for session ending 1-2-14
 

Last

Net Chg

%Change

S&P 500 Index

1831.98

-16.38

-.89%

Dow Jones Industrials

16441.35

-135.31

-.82%

NASDAQ Composite

4143.06

-33.52

-.80%

Value Line Index

4337.13

-42.03

-.61%

Russell 2000

1150.72

-12.92

-1.11%

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 lost modest ground Thursday on first day of new trading year
  • Market volume, returning toward normal levels, increased 25%.
  • S&P 500 remains positive on Minor Cycle and must close below lower edge of 10-Day Price Channel (1810.43 through Friday) to suggest more negative near-term trend. Intermediate Cycle remains positive so long as S&P holds above lower edge of 10-Week Price Channel (1750.25 through January 3).
  • Our VIX-based volatility indicator, VBVI, declined to 79.79% Thursday from Tuesday’s 84.86%. Indicator tends to decline on market weakness. VBVI remains “Overbought” on larger Intermediate Cycle (95.15%).
  • Daily MAAD was negative by 8 to 12 Thursday after rallying to new high and best level since March 2009 on Tuesday. Indicator remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was “Overbought” at 1.68.
  • Daily CPFL was positive by 1.50 to 1 Thursday and inched higher to best level since October 9 short-term low. 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 “Overbought” at 2.21.

Market Overview – What We Think:

  • In this week’s Market Summary we suggested that “…it wouldn’t take much selling to flip a low volume short-term uptrend trading at new price highs into a higher volume short-term decline that could morph into a full-fledged Intermediate Cycle retreat.” Thursday’s selling on post holiday volume could be tip of that iceberg.
  • Decision point for this rally will be lower edges of 10-Day Price Channels (see table below) and how short-term Trading Oscillators, now “Overbought” respond in sessions just ahead.
  • Strength to new highs in all of major indexes Tuesday was nice cap to year of trading and bull trend that began in March 2009, but it remains to be seen if low volume pre-holiday rally will have staying power, as market becomes more “normal” in new year.
  • In meantime, short-term trend remains positive within context of still favorable Intermediate and Major Cycle trends and burden of proof remains on bears who have failed to put in any meaningful appearance for over a year.
  • Underscoring bearish failure is fact that while larger Intermediate and Major Cycle trends have remained “Overbought” for many months, Minor Cycle overheated readings have not morphed into anything more than brief, corrective actions.

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

12/30

12/31

1/1 HOL

1/2

1/3

1/3

1/31

S&P 500 Index

SELL 1781.94

SELL 1786.62

SELL 1793.21

SELL 1801.68

SELL 1810.43

SELL 1750.25

SELL 1551.80

Dow Jones Industrials

SELL 15920.11

SELL 15980.35

SELL 16049.50

SELL 16126.56

SELL 16210.08

SELL 15585.42

SELL 14355.21

NASDAQ Composite

SELL 4021.77

SELL 4040.90

SELL 4062.39

SELL 4084.32

SELL 4102.44

SELL 3879.09

SELL 3288.16

Value Line Index

SELL 4203.17

SELL 4221.02

SELL 4244.16

SELL 4269.79

SELL 4291.05

SELL 4124.47

SELL 3532.00

Russell 2000

SELL 1114.81

SELL 1121.67

SELL 1129.23

SELL 1136.83

SELL 1142.63

SELL 1092.22

SELL 933.67

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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