Technical Stock Market Report

The good news is:  Last week new lows disappeared and new highs began accumulating.

The negatives: The major indices are up 7% - 8% in the past two weeks; Consequently, the market is overbought.

The positives

New lows disappeared last week.  On the NYSE there were 268 new lows on Friday October 2 and 20 on Monday October 5, a decline of over 90%.  On the NASDAQ there were 200 new lows on Friday October 2 and 38 on the following Monday, an 80% decline.  I have been talking about how new lows will disappear when a bottom has been reached.  There it is.

The first chart shows the S&P 500 (SPX) in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue.  Dashed vertical lines have been drawn on the 1st trading day of each month.  Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

In one week this indicator has gone from an extremely negative 4% to a comfortably positive 74%.

The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.

OTC HL Ratio jumped from 10% to 58%.

New highs reached their highest levels in 2 months.

The chart below covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH), in green.

The first signs of life we have seen in this indicator in 3 months.

The next chart is similar to the one above except is shows the OTC in blue and OTC NH, in green has been calculated with NASDAQ data.

The pattern is similar to NY NH.

Conclusion

The late September low appears to have been a successful retest of the August low.  By that I mean it is unlikely the major averages will fall below the August and September lows any time soon.  The major averages have been up 7% - 8% in the past 2 weeks so the market is overbought and seasonality for next week is negative.

I expect the major averages to be lower on Friday October 16 than they were on Friday October 9.

Last weeks negative forecast was a miss

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Disclaimer:  Charts and figures presented herein are believed to be reliable but I cannot attest to their accuracy.  Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus and the Wall Street Journal (wsj.com).  Historical data is from Barron’s and ISI price books.  The views expressed dare provided for information purposes only and should not be construed in any way as investment advice.  Furthermore, the opinions expressed may change without notice.