Technical Stock Market Report

The good news is:  New highs picked up last week.

The negatives:  We expect to see the secondaries lead both up and down and they have been the laggards since the recent lows.

Here are the recent performance summaries for the Dow Jones Industrial Average (DJIA) (very large cap), S&P 500 (SPX)(large cap), NASDAQ composite (OTC)(big tech) and the Russell 2000 (R2K)(small cap).

Index Above recent low        Below all time high

DJIA            10.3%                0.6%

SPX             11.1%                1.6%

OTC           11.7%                2.1%

R2k             7.6%                 5.9%

This is not the pattern we like to see.

We are entering a strong seasonal pattern that is likely to give us new all time highs in the blue chip indices.  However, if the secondaries do not improve, this is likely to be a developing top.

New lows also picked up last week (not what you like to see in a strong week for the major indices).

The positives

New highs picked up nicely, finishing the week with 130 on the NYSE and 141 on the NASDAQ.

The first chart shows the 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.

NY HL Ratio finished the week at a comfortable 68%.

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 has been a little weaker than NY HL Ratio, but managed to remain in positive territory.  Same as last week.

New highs are finally showing some life.

The next chart 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.

NY NH moved sharply upward last week.

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

OTC NH is also showing the first signs of life in months.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth has had an inverse relationship to the stock market recently.

Conclusion

The weakness in the secondaries is troublesome, however, new highs are coming to life and the next 2 weeks are seasonally strong.

I expect the major averages to be higher on Friday October 30 than they were on Friday October 23.

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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.

Courtesy of http://www.stockmarket-ta.com/