Technical Stock Market Report

The good news is:  The mid and small cap indices closed at all-time highs on Friday

The negatives:  Negatives are pretty hard to find.

The new high indicators failed to confirm the small cap highs, but they did turn up; setting up a pattern of higher lows.

The positives: Volume picked up and the secondaries outperformed the blue chips.

There have been very few new lows and, as long as that is the case, nothing very bad will happen.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio) in red.  Dashed vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio continued at a very strong 93%.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio also held above 90% last week.

The next chart shows the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs in green.

There is a mixed message in this chart, over the past 6 months there is a pattern of declining tops, however, over the past month we have rising bottoms.

The next chart is similar to the one above except it shows the SPX in red and NY NH has been calculated from NYSE data.

The patterns here are not as clear other than rising bottoms over the past month..

 Conclusion:   Post-holiday volume picked up, new highs picked up and the secondaries outperformed the blue chips.  The market appears to be in pretty good shape.

I expect the major averages to be higher on Friday January 17 than they were on Friday January 10.

Last week the Dow Jones Industrial Average was down a little while the other major averages were up a little so I am calling last week’s negative forecast a tie.

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Disclaimer: Mike Burk is an employee and principal of Alpha Investment Management (Alpha) a registered investment advisor. Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy.   Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) 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.