Frenetic stock market feels positive toward new highs

MAAD & CPFL Report

 

Market Snapshot for session ending 1-16-14
 

Last

Net Chg

%Change

S&P 500 Index

1845.89

-2.49

-.13%

Dow Jones Industrials

16417.01

-64.92

-.39%

NASDAQ Composite

4218.68

+3.80

+.09%

Value Line Index

4398.94

-2.80

-.07%

Russell 2000

1173.13

+1.78

+.15%

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:

  • Major indexes were mixed Thursday, as NASDAQ Composite and Russell 2000 closed at new highs. S&P 500 and Value Line index pulled back from new closing highs made Wednesday, but Dow 30 lags while still holding below December 31 peak.
  • To suggest more negative tone on Minor Cycle, S&P 500 must close below lower edge of 10-Day Price Channel (1830.79 through Friday). Intermediate Cycle remains positive until S&P seriously challenges lower edge of 10-Week Price Channel (1766.14 through January 17).
  • VBVI, our VIX-based volatility indicator, backed off slightly Thursday, but remains toward “Overbought” territory at 88.40%. Indicator remains “Overbought” on larger Intermediate Cycle (96.22%).
  • Daily MAAD was decidedly negative by 3 to 16 with 1 issue unchanged Thursday after indicator rallied Wednesday to best level since March 2009. But Daily MAAD remains above uptrend line stretching back to November 2012. Daily MAAD Ratio was last marginally “Overbought” at 1.29.
  • Daily CPFL was positive by 3.13 to 1 Thursday 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 continues to shrink. Daily CPFL Ratio was moderately “Overbought” at 1.62.

Market Overview – What We Think:

  • Frenetic market remains more positive than not on near term, but trend does not look particularly “solid” considering fact pricing in major indexes is mixed. S&P 500 merely eked out slightly higher closing high Wednesday while Dow 30 isn’t even in game, still holding below new high made back on December 31. Recent best performers have been NASDAQ Composite and Russell 2000 with Value Line index coming in third.
  • So either “strength” to new highs by all except Dow will eventually drag blue chip index upward, or “rally” since Monday’s lows will prove to be bullish bump fueled by weaker hands and Dow failure will be prescient.
  • Simply put, without all of majors running on all cylinders on upside there will be doubts as to staying power of this market. Its true next larger Intermediate Cycle remains positive as does long-term trend, but as we’ve suggested frequently, it will be Minor Cycle that will ultimately ring death knell on both of larger cycles.
  • For now Minor Cycle is sort of positive, but unless there is more buying to push all of majors to new highs, we cannot rule out possibility back and forth price action over past few weeks will prove to be topping action into intermediate-term high that could lead to reversal of at least uptrend since November 2012.

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.

Next page: Indicator review

We are also updating the daily chart of both the Call/Put Dollar Value Flow Line (CPFL) and Most Actives Advance/Decline Line (MAAD) indicators every day and providing the most recent raw data so you can begin to plot the indicators on your own (see below). The weekly equity index indicator summary provides longer-term commentary based on these indicators.

The definitions of the indicators along with links to the original stories provide helpful background. Also, Robert describes these indicators in a recent I-Trade show presentation available online.

MAAD daily data for past 30 days*

CPFL daily data for past 30 days

Date

NYSE Adv

NYSE Dec

Date

OEX Call $Volume

OEX Put $Volume

12-3-13

3

17

12-3-13

13235

33562

12-4-13

11

9

12-4-13

26402

18595

12-5-13

7

13

12-5-13

31410

13707

12-6-13

16

3

12-6-13

22945

13104

12-9-13

15

4

12-9-13

36555

21177

12-10-13

9

11

12-10-13

8583

16960

12-11-13

3

17

12-11-13

13966

53074

12-12-13

6

12

12-12-13

27639

43433

12-13-13

10

10

12-13-13

17558

20607

12-16-13

14

5

12-13-16

23369

6899

12-17-13

10

10

12-17-13

9268

13271

12-18-13

15

4

12-18-13

19768

10649

12-19-13

5

15

12-19-13

26763

13836

12-20-13

15

5

12-20-13

22527

8771

12-23-13

16

3

12-23-13

27118

8283

12-26-13

13

7

12-26-13

25588

10671

12-27-13

11

9

12-27-13

10052

5303

12-30-13

6

14

12-30-13

22163

3691

12-31-13

17

3

12-3-13

6375

4742

1-2-14

8

12

1-2-14

18700

12483

1-3-14

7

13

1-3-14

3514

7998

1-6-14

10

10

1-6-14

4339

4601

1-7-14

13

6

1-7-14

28634

6919

1-8-14

11

8

1-8-14

3499

4498

1-9-14

9

11

1-9-14

5010

3925

1-10-14

15

5

1-10-14

4831

4330

1-13-14

6

14

1-13-14

14287

19839

1-14-14

17

3

1-14-14

23560

10258

1-15-14

16

4

1-15-14

20412

9248

1-16-14

3

16

1-16-14

17058

5450

*Note: Unchanged issues are not counted.

About the Author

Robert McCurtain is a technical analyst/market timer, private investor and financial markets consultant based in New York City.