Technical Stock Market Report

The good news is:  New lows disappeared last week.  The decline we have been experiencing since late December is over.

The Negatives:  Last Wednesday there were 1395 new lows on the NYSE and 908 on the NASDAQ.  Those numbers are so high that a retest of last week’s lows is likely in the next several months.

The positives:  There were 1395 new lows on the NYSE last Wednesday and 27 on Friday, a 98% decline in 2 days. There were 908 new lows on the NASDAQ last Wednesday and 60 on Friday, a 93% decline in 2 days.

This is wonderful example of how new lows disappear at a bottom.

The chart below covers the past 3 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).   Dashed vertical lines have been drawn on the 1st trading day of each month.

I shortened the duration of this chart so you could see the sharp upward movement of NY NL.

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

Same pattern.

The next chart covers the past 6 months showing 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 horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

NY HL Ratio hit 1.2% Wednesday, its lowest level in a long time, but is moving sharply upward now.

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

The pattern is similar for OTC HL Ratio.

Money supply (M2) & Yield curve

The charts were provided by Gordon Harms.

Money supply growth moved sharply upward last week.

Perhaps PPT intervention.

Conclusion

The new low disappearing act we have been waiting for occurred last week.

The rally that began Thursday or Friday should continue for at least several weeks.

I expect the major averages to be higher on Friday January 29 than they were on Friday January 22.

Last week’s 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.