Technical Stock Market Report

The good news is:  The market is oversold and due for a bounce.

The negatives

Last week the market took a tumble from which it is unlikely to fully recover anytime soon.

New lows increased to uncomfortable levels, new highs disappeared and the secondaries underperformed the blue chips.

The chart below covers the past year showing the NASDAQ composite (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 at its lowest level in over a year.

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

NY NH has been a little stronger than OTC NH, but, the all time high of less than 2 weeks ago lacked broad support.

The next chart is one that I have been showing as a positive.  It 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 has fallen below the neutral line.  Literally this means there have been more new lows than new highs on the NASDAQ.

The big problem is seasonality.  There have been substantial declines during all periods, but the most regularly occurring one runs between mid April and early October during the 2nd year of the Presidential Cycle (this year).  This year it appears to have begun a couple weeks early.

The positives

The chart below is similar to the previous one except is shows the SPX, in red, and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio fell sharply last week, but remains above the neutral line.

The next several charts are very short term.

They show momentum of breadth indicators and there is an oscillator component to all of them.  They are all near their lows of the past 6 months suggesting a short term rally.  You need not understand how they are constructed, just how they work.

The chart below shows the SPX in red and the McClellan Oscillator (the difference between a 19 day and 39 day EMA of NYSE advancing issues – declining issues (NY AD MCO) in blue. 

This charts show the SPX in red and momentum of an oscillator of NYSE new highs – new lows, in brown.

This charts shows momentum of an oscillator of NYSE upside volume – downside volume, in olive drab.

This chart shows the OTC in blue and a McClellan Oscillator calculated from NASDAQ advance – decline data in black.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth took a tumble last week.

Conclusion

The market is oversold and likely to rally next week, but the narrowing of leadership, indicated by the diminishing number of new highs and negative seasonality are catching up with it.  A rally next week is likely, but new highs are not.

I expect the major averages to be higher on Thursday April 17 than they were on Friday April 11.

Last week’s positive forecast was a miss.

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I no longer have any affiliation with Alpha Investment Management so these reports will be coming from mikeburk@stockmarket-ta.com for the foreseeable future.

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 (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.