Nasdaq, key indicator to new highs as market shows strength

MAAD & CPFL Report

 

Market Snapshot for session ending 1-14-14
 

Last

Net Chg

%Change

S&P 500 Index

1838.88

+19.68

+1.08%

Dow Jones Industrials

16373.86

+115.91

+.71%

NASDAQ Composite

4183.01

+69.71

+1.69%

Value Line Index

4377.00

+54.98

+1.27%

Russell 2000

1163.43

+15.34

+1.34%

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

  • Largely reversing Monday’s sharp losses, major indexes recovered Tuesday with NASDAQ Composite rallying to new closing high with confirming action by Daily Most Actives Advance/.Decline Line (MAAD).
  • Market volume declined 17% on strength, however.
  • Via Tuesday’s recovery, S&P 500 finds itself stuck between proverbial “rock and a hard place.” Monday’s selling pushed index below lower edge of 10-Day Price Channel while Tuesday’s gains moved it back above upper edge of 10-Day Price Channel. As a consequence, short-term trend temporarily remains in limbo. S&P holds above lower edge of 10-Week Price Channel (1766.14 through January 17) on Intermediate Cycle.
  • VBVI, our VIX-based volatility indicator, but remains toward “Overbought” territory and was plotted at 89.40% Tuesday. VBVI remains “Overbought” on larger Intermediate Cycle (96.22%).
  • Daily MAAD was positive Tuesday by 17 to 3 Tuesday and was last plotted at best level since March 2009. Indicator remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last marginally “Overbought” at 1.33.
  • Daily CPFL was positive by 2.30 to 1 Tuesday and rallied to best level since October 9 short-term low. Indicator remains below June 11 short to intermediate-term peak, but margin relative to that high has been shrinking. Daily CPFL Ratio was moderately “Overbought” at 1.42.

Market Overview – What We Think:

  • Tuesday’s recovery in major indexes is further proof of just how dead this market is not. Thus our suggestion that short sellers looking to get in on early reversal could be in for some rude surprises.
  • Underscoring Tuesday’s gains was fact NASDAQ Composite rallied to new closing high with similar action in Daily MAAD that continues to underscore willingness of Smart Money to remain long equities. With new high in Daily MAAD we would not be surprised to see other indexes follow lead of COMPX on upside. So long as Daily MAAD continues to confirm market gains, even lead them, more new highs could follow. Thing to remember is that there will inevitably be Minor Cycle rally that will be last rally of bull market.
  • But if short-term trend does not have staying power and sinks, as intermediate-term uptrend comes under serious threat, then visions of longer-term problems would begin surfacing.

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

1/13

1/14

1/15

1/16

1/17

1/17

1/31

S&P 500 Index

SELL 1831.45

SELL 1831.26

SELL 1831.22

SELL 1830.84

SELL 1830.79

SELL 1766.14

SELL 1551.80

Dow Jones Industrials

SELL 16419.79

SELL 16429.04

SELL 16431.50

SELL 16423.55

SELL 16414.17

SELL 15700.32

SELL 14355.21

NASDAQ Composite

SELL 4133.80

SELL 4132.88

SELL 4134.21

SELL 4134.81

SELL 4135.39

SELL 3934.14

SELL 3288.16

Value Line Index

SELL 4340.40

SELL 4339.13

SELL 4340.23

SELL 4339.55

SELL 4341.34

SELL 4157.21

SELL 3527.53

Russell 2000

SELL 1153.04

SELL 1152.17

SELL 1151.82

SELL 1151.49

SELL 1151.75

SELL 1099.71

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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