Technical Stock Market Report

The good news is:  The NASDAQ composite (OTC) closed at a multi year high on Friday while the S&P 500 (SPX) missed its all time high by only 0.5%.

The negatives:  The market is overbought.

The OTC has been up for 7 consecutive days and a Telecomm fund I watch has been up for 9 consecutive days.

New highs picked up last week, but remain well below their levels of a month ago when the major indices were making new highs.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH is well below its level at the previous high for the OTC, a month ago.

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

NY NH has also had progressively declining highs since last October.

The positives:  New lows have disappeared and nothing really bad happens without new lows increasing.

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

OTC HL Ratio rose sharply to 86% on Friday.

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 SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio also rose to 86% on Friday. 

Money Supply (M2):   The money supply chart was provided by Gordon Harms.

Money supply growth has been following its trend pretty closely.

Conclusion:   The market rose sharply last week, but the breadth indicators did not keep up.  Seasonality suggests the trend should flatten over the next 2 months prior to beginning a decline in mid to late April.

I expect the major averages to be higher on Friday February 21 than they were on Friday February 14.

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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.