Minor stock market cycle takes hit; intermediate trend next?

MAAD & CPFL Report

 

Market Snapshot for session ending 1-23-14
 

Last

Net Chg

%Change

S&P 500 Index

1828.46

-16.40

-.89%

Dow Jones Industrials

16197.35

-175.98

-1.07%

NASDAQ Composite

4218.87

-24.12

-.57%

Value Line Index

4378.25

-34.39

-.78%

Russell 2000

1172.40

-8.89

-.75%

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

  • Sharp losses were suffered by major indexes Thursday. Dow 30 signaled short-term negative with S&P 500 in close second. NASDAQ Composite, Value Line, and Russell 2000 indexes remain positive on Minor Cycle, but margin of positivity narrowed markedly.
  • Market volume increased just over 14% on price weakness.
  • Via Thursday’s losses, S&P 500 was right at cusp of short-term negative relative to lower edge of 10-Day Price Channel (1828.36). With Friday’s slightly higher Price Channel plot (1830.58), S&P could signal new short-term negative by default if it closes anywhere below Thursday’s close at 1828.46.
  • On market weakness. VBVI, our VIX-based volatility indicator, moved lower Thursday to 82.68% from Wednesday’s 89.53%. Indicator remains moderately “Overbought.” VBVI remains “Overbought” on larger Intermediate Cycle (96.09%).
  • Daily MAAD was sharply negative Thursday with 4 issues higher and 16 lower. Indicator nonetheless remains above uptrend line stretching back to November 2012, but is on verge of new Minor Cycle negative. Daily MAAD Ratio was “Neutral” at 1.00.
  • Daily CPFL was positive by 1.21 to 1, despite market losses Thursday, and moved to best level since October 9 short-term low and on long-term since early August 2011. Daily CPFL Ratio was “Overbought” at 2.13.

Market Overview – What We Think:

  • Relative market indecision over past few weeks and during all of New Year was given some negative resolution Thursday to suggest that new highs in COMPX, VALUA, and TFY over past few days with only slight confirmation by S&P 500 and none from Dow 30, may prove to be frosting with no “cake.”
  • In other words, longer-term “Overbought” conditions may be finally beginning to bite pricing and some corrective action on short to intermediate-term trends could develop in weeks just ahead.
  • As we have suggested repeatedly, however, unless a new short-term negative has an appreciable effect on larger Intermediate Cycle underway since November 2012 to extent Trading Oscillators sink below 1.00 and prices below defined uptrend lines, any near-term pull back could once again prove to be just a correction in larger trends.
  • Underscoring all of this is fact that once short-term negative, if it fully develops, runs its course, nothing but new highs would reassert bull market begun in March 2009.

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

 

1/20

1/21

1/22

1/23

1/24

1/24

1/31

S&P 500 Index

HOL

SELL 1827.71

SELL 1826.14

SELL 1828.36

SELL 1830.58

SELL 1770.00

SELL 1551.80

Dow Jones Industrials

HOL

SELL 16379.47

SELL 16352.47

SELL 16350.47

BUY 16480.50

SELL 15740.94

SELL 14355.21

NASDAQ Composite

HOL

SELL 4128.24

SELL 4127.15

SELL 4139.12

SELL 4151.93

SELL 3951.19

SELL 3288.16

Value Line Index

HOL

SELL 4335.16

SELL 4331.98

SELL 4339.42

SELL 4348.31

SELL 4167.82

SELL 3527.53

Russell 2000

HOL

SELL 1149.27

SELL 1151.67

SELL 1154.98

SELL 1157.54

SELL 1103.21

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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