Indexes approach near-term oversold, statistical supports

MAAD & CPFL Report

Dear reader,

After four years and careful consideration, I have decided to stop producing the Daily and Weekly Market Summaries for Futures magazine online.

Because I have had a very good relationship with Futures over the years, I will continue to write on specific themes which the editors of the magazine feel would benefit their readers. That is the way my association with the magazine began in the first place, and the current change is simply a reversion to that norm.

I do want to thank those of you who have responded favorably to my work and for the helpful comments you have offered. I hope my efforts have stimulated you toward creative market research and strategies that will continue to lead you to consistent profitability.

Thank you.

Kindest regards,
Robert McCurtain

Below is the final daily market update. 

Market Snapshot for session ending 1-30-14
 

Last

Net Chg

%Change

S&P 500 Index

1794.19

+19.99

+1.13%

Dow Jones Industrials

15848.61

+109.82

+.70%

NASDAQ Composite

4123.12

+71.69

+1.77%

Value Line Index

4278.05

+50.07

+1.18%

Russell 2000

1139.36

+16.91

+1.51%

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:

  • Major indexes snapped back from recent losses, again, Thursday with NASDAQ Composite biggest gainer, up 1.77%.
  • Market volume declined 9.1% on strength, however.
  • S&P 500 is currently negative on Minor Cycle and must rally above upper edge of 10-Day Price Channel (1842.50 through Friday) 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 to 39.34% Thursday, and despite strength, from Wednesday’s 43.00%. Indicator is not yet into “Oversold” territory. VBVI on Intermediate Cycle was last toward “Overbought” at 88.51%.
  • Daily MAAD was positive by 15 to 5 Thursday, remains below new high made January 15, and just below defined uptrend line stretching back to November 2012 lows. Daily MAAD Ratio remains negative (.60) and in “Oversold” territory.
  • Daily CPFL was negative by 1.17 to 1 Thursday and was holding below new high made January 23 at best level since early August 2011. Daily CPFL Ratio was marginally “Overbought” at 1.19.

Market Overview – What We Think:

  • Market (primarily S&P 500 and Dow 30) bounces higher in vicinity of Intermediate Cycle statistical support (10-Week Price Channels), as short-term “Oversold” conditions suggested possible near-term opportunity.
  • Does rebounding mean that weakness since mid-January will prove to be “much ado about nothing?”
  • As we have continued to note, despite some notes of hysteria in financial press over past couple of weeks, nothing but concerted weakness on Minor Cycle that morphs into serious challenge on larger Intermediate Cycle is going to sink this market.
  • On other hand, nothing but new highs will re-assert bull trend begun in March 2009.
  • In middle are some less interesting options such as strength that does not result in new highs even though short-term trend puts in valiant upside effort. Or, thrice-staged rebounding proves to be yet another failure and short-term trend weakens further, seriously threatens intermediate-term uptrend in effect since November 2012, and bears begin to get really nervous.
  • Fact that Daily MAAD has shown less deterioration than index pricing could be slightly bullish, but additional fact that indicator has fractured uptrend line stretching back to November 2012 is problematic.

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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