Sellers bite market again

MAAD & CPFL Report

 

Market Snapshot for session ending 1-27-14
 

Last

Net Chg

%Change

S&P 500 Index

1781.56

-8.73

-.49%

Dow Jones Industrials

15837.88

-41.23

-.26%

NASDAQ Composite

4083.60

-44.56

-1.08%

Value Line Index

4236.69

-35.62

-.84%

Russell 2000

1127.73

-16.40

-1.44%

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

Intermediate Cycle* (Medium trend lasting weeks to several months) Neutral / Negative

Major Cycle* (Long-term trend lasting several months to years) Positive

* Cycle status is based on S&P 500.

Market Overview – What We Know:

  • More selling surfaced in major indexes Monday, but while rate of descent diminished somewhat in S&P 500 and Dow 30, selling pressures increased in COMPX, VALUA, and TFY.
  • Market volume decreased 7.4% relative to last Friday’s levels.
  • S&P 500 is currently negative on Minor Cycle and must rally above upper edge of 10-Day Price Channel (1845.86 through Tuesday) to indicate more positive near-term tone. Lower edge of 10-Week Price Channel on Intermediate Cycle becomes challenged below 1781.63 through January 31.
  • VBVI, our VIX-based volatility indicator, declined Monday to 51.33% from Friday’s 59.63%. VBVI on Intermediate Cycle was last toward “Overbought” at 88.51%.
  • Daily MAAD was negative Monday with 2 issues higher and 18 lower. While broad market has erased most of gains since mid-December short-term low, Daily MAAD has only fallen back about two-thirds of same distance. Daily MAAD Ratio was negative at .66.
  • Daily CPFL was negative by 2.33 to 1 Monday and remained slightly below high made last Thursday at best level since early August 2011. Daily CPFL Ratio was moderately “Overbought” at 1.59.

Market Overview – What We Think:

  • Monday’s selling moved S&P 500 and Dow 30 within range of lower edges of 10-Week Price Channels on Intermediate Cycle with COMPX, VALUA, and TFY following suit. Proximity of those statistical support levels could set stage for some rebounding action in sessions just ahead, considering extent of losses over past several sessions.
  • If, however, there is no short-term rebounding and selling pressures continue, odds would be good that uptrend initiated in November 2012 would be over. In fact, weakness by Daily MAAD below defined uptrend stretching back to November 14, 2012 is a negative omen in favor of more selling, ultimately.
  • In other words, longer-term “Overbought” conditions may be finally beginning to bite pricing and at least some larger cycle corrective action 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 trend, any near-term pull back could once again prove to be just a correction in larger cycle. With market on cusp of intermediate negativity, that issue will soon be resolved.
  • Underscoring all of this is fact that once short-term negative 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
 

1/27

1/28

1/29

1/30

1/31

1/31

1/31

S&P 500 Index

BUY 1844.74

BUY 1845.86

BUY 1846.32

BUY 1845.83

BUY 1842.50

SELL 1781.63

SELL 1551.80

Dow Jones Industrials

BUY 16480.26

BUY 16485.05

BUY 16477.87

BUY 16458.02

BUY 16410.15

SELL 15847.31

SELL 14355.21

NASDAQ Composite

BUY 4197.01

BUY 4204.90

BUY 4214.56

BUY 4218.60

BUY 4216.86

SELL 3989.18

SELL 3288.16

Value Line Index

BUY 4388.60

BUY 4383.58

BUY 4398.72

BUY 4402.61

BUY 4399.44

SELL 4195.25

SELL 3527.53

Russell 2000

BUY 1168.42

BUY 1170.40

BUY 1172.96

BUY 1174.99

BUY 1173.76

SELL 1112.77

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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