Stock market minor cycle is more negative, but reversal unconfirmed

MAAD & CPFL Report

 

Market Snapshot for session ending 1-6-14
 

Last

Net Chg

%Change

S&P 500 Index

1826.77

-4.60

-.25%

Dow Jones Industrials

16425.10

-44.89

-.27%

NASDAQ Composite

4113.68

-18.22

-.44%

Value Line Index

4324.01

-25.38

-.59%

Russell 2000

1147.16

-8.93

-.77%

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

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:

  • Follow through selling, albeit modest, plagued major indexes Monday. Biggest loser was Russell 2000 that was down .77%. Short-term trend has become more tentative.
  • Market volume, returning toward normal levels, rose nearly 31% Monday.
  • S&P 500 remains positive on Minor Cycle and must close below lower edge of 10-Day Price Channel (1822.76 through Tuesday) 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 (1759.65 through January 10).
  • Our VIX-based volatility indicator, VBVI, declined to 78.13 Monday from Friday’s 77.65%. Indicator tends to decline on market weakness. VBVI remains “Overbought” on larger Intermediate Cycle (94.47%).
  • Daily MAAD was flat Monday with 10 issues positive and 10 negative. Indicator rallied to new high December 31, best level since March 2009, and remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was “Overbought” at 1.55.
  • Daily CPFL was negative by 1.06 to 1 Monday. Indicator reached best level since October 9 short-term low on January 2, but also remains 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 2.04.

Market Overview – What We Think:

  • Minor Cycle trend under increasing threat since last Thursday has moved closer to downside “failsafe” points in that statistical resistance at lower edges of 10-Day Price Channels are visible. If rebounding action is going to develop it could occur in current environment.
  • If, however, market does not respond on upside in sessions just ahead, we could make case for new short-term negative that could then have some effect on larger, but still positive, Intermediate Cycle.
  • Extent to which short-term negative might affect larger trend could then determine whether or not advance since November 2012 is in endgame.
  • But if market does rally from current levels, nothing but new highs would re-assert long-term advance begun in March 2009.
  • Given fact market has taken on “Neutral” tone short term, burden of proof is on both bulls and bears, although considering fact bears have demonstrated little staying power in over a year, longer-term onus rests more on their shoulders than with bulls who could create new highs will only modestly more effort.

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

1/6

1/7

1/8

1/9

1/10

1/10

1/31

S&P 500 Index

SELL 1816.29

SELL 1822.76

SELL 1828.67

SELL 1830.74

SELL 1832.15

SELL 1759.65

SELL 1551.80

Dow Jones Industrials

SELL 16210.08

SELL 16282.68

SELL 16347.78

SELL 16381.91

SELL 16409.65

SELL 15656.09

SELL 14355.21

NASDAQ Composite

SELL 4102.44

SELL 4115.56

SELL 4129.35

SELL 4135.28

SELL 4137.79

SELL 3910.11

SELL 3288.16

Value Line Index

SELL 4291.05

SELL 4309.50

SELL 4325.96

SELL 4334.87

SELL 4340.24

SELL 4147.41

SELL 3527.53

Russell 2000

SELL 1142.63

SELL 1147.59

SELL 1151.81

SELL 1152.57

SELL 1153.55

SELL 1097.49

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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