Market Overview – What We Think:
- Minor Cycle continues to look vulnerable to extent we suspect ascent of market is unsustainable in face of “Overbought” conditions and Momentum that continues to fail on upside.
- In spite of bullish price “tendencies” since November lows, uptrend initiated in March 2009 is mature. In fact, upside “measured move” targets calculated on a variety of cycle points suggest that on average S&P, Dow 30, NASDAQ, and VAY could be within range of make long-term highs in this bull trend.
- So long as pricing and indicators are not in synch on upside as they were from March 2009 until May 2011, lingering long-term doubts will persist, and we will continue to wonder how much longer this market will be able to shake off unfavorable indicator divergences.
- But so long as Minor, Intermediate, and Major Cycles remain positive, however, deference must be paid to trend direction regardless of lack of indicator confirmations.
In short, the market is comprised of many themes, but the primary benchmarks we must follow are index pricing and market underpinnings. In a nutshell, while the market has made modest progress for the better part of the past two years, the majority of it since last November relative to the May 2011 highs, our key indicators have continued to lag price action. Some such as our Call/Put Dollar Value Flow Line (CPFL) have perked marginally higher over the past several months, but on a relative basis have not confirmed strength in the major indexes.
Daily S & P 500 with Cumulative Volume (CV)
Weekly S & P 500 with Cumulative Volume (CV)
All that our key indicators have had in common with the gains in the major indexes since the March 2009 lows and to some extent over the past two years is that they have all been moving in the same direction at the same time. All were in synch on the upside off of the 2009 lows. All peaked into the first intermediate high in April 2010 and then pulled back into the July lows. All then advanced into the May 2011 highs, pulled back, rallied to March 2012, pulled backed, rallied to September 2012, pulled back, and rallied to current bids. Point is, while synchronicity in terms of direction has been coincident since March 2009, the extent and degree of indicator movement has not confirmed price action. In other words, the higher prices have moved, the extent of each price rally has diminished as the indicators have held back.