Market Overview – What We Know:

• Major indexes realized marginal gains Tuesday when S&P 500, Dow 30, and Value Line index all rallied to new short to intermediate-term highs. VAY rallied to new all-time high. Only NASDAQ Composite has yet to better September resistance level.
• Trading volume declined by 14% compared to last Friday’s levels.
• All cycles including Minor, Intermediate, and Major remain positive, but all are “Overbought” on Minor Cycle and moderately “Overbought” to “Overbought” on intermediate trend.
• To suggest short-term negative, S&P must sink below lower edge of 10-Day Price Channel (1462.73 through Wednesday). Intermediate trend turns negative below (1388.08). And long-term trend below (1391.74).
• Despite movement to new highs Tuesday, Daily MAAD was slightly positive with 11 issues up and 9 down, and remains only slightly above December 20 minor resistance. Daily MAAD Ratio was above “Neutral” at 1.14.
• Daily CPFL was negative Tuesday by 1.02 to 1 and remains below September intermediate resistance. Daily CPFL Ratio is “Overbought” at 1.57.
• Cumulative Volume (CV) in S&P 500 rallied to new short to intermediate high Tuesday, but action was not confirmed by CV in S&P Emini or Dow 30.

Market Overview – What We Think:

• S&P’s move to best level Tuesday since November 16 low (1343.35) and highest closing level since December 2007 gives market more favorable tone along with strength to new all-time highs in Value Line index.
• Thursday’s move by CV in cash S&P to new short-term high gave bulls a vote of confidence, but failure by S&P Emini and Dow 30, and ongoing lag by NASDAQ Composite continues to underscore fact market gains remain spotty.
• Suggestion lingers that rally since November lows has been fueled by weaker hands than during previous rallies and continues to lack statistical underpinnings. Larger cycles have also lacked indicator confirmation since early 2011.
• Lingering weakness in MAAD, CPFL, Cumulative Volume, and Momentum, are an indication market could be on borrowed time. Nothing but new highs by all our key indicators would erase that negative tone.

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.

*Note: Unchanged issues are not counted.