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Confirming Cycle Highs Remains Elusive

NEW YORK ( TheStreet) -- Here we go again trying to confirm recent market highs as cycle highs. All five of the major equity averages must have negative weekly chart profiles simultaneously. That won't happen this week as the weekly charts for the Nasdaq Composite and Russell 2000 remain positive but overbought.

The weekly charts attempted to time the May highs as cycle highs, but all five of the major equity averages didn't shift to negative.

Similarly, we tried to confirm the early August highs as cycle highs, but again all five major averages didn't shift to negative, preventing this confirmation.

Today the only major average that could have a negative weekly chart is the Dow Jones Industrial Average given a close today below its five-week modified moving average at 15,182.

The fundamentals have been favoring a market top since mid-May as the stock market has been trading under the cloud of a ValuEngine valuation warning since then with 65% or more of all stocks overvalued. Today 76.5% of all stocks are overvalued, 41% by 20% or more.

The DJIA set an all-time high at 15,342.40 on May 22, and then declined to 14,551.27 on June 24. The next rally was to another all-time high at 15,658.43 into Aug. 2, which was followed by a decline to 14,760.41 into Aug. 28. The third all-time high since May was 15,709.58 set on Sept. 18. As the daily chart below shows, the subsequent low at 14,719.43 on Oct. 9 was a test of the 200-day simple moving average.

Courtesy of MetaStock Xenith

Even after the DJIA rose 323 points on Thursday, the benchmark was 2.7% below its May 22 high. This week my weekly value level at 14,809 was violated with the week's low at 14,719.43, which held my semiannual value level at 14,724. The 14,809 level then became a weekly pivot which was quickly penetrated and held on Thursday.

The Dow is the only one of the five major averages that stayed below its 50-day simple moving average at 15,195. Volatility between now and year end can be mind-boggling. The nearest value levels below 14,724 are my annual value levels at 12,696 and 12,509.

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