Technical Stock Market Report

The good news is:  The NASDAQ composite (OTC) closed at a multi year high Friday and the rest of the major indices closed at all time highs. 

The negatives: The market is overbought.

For the past 6 weeks most of the major indices have been rising at an annualized rate that exceeds 50%. 

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 recovered a bit last week, but remains closer to its low of the past 6, months or even 2 years, than its high.

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

NY NH has been stronger than OTC NH, and hit a 6 month high last week, but is well below its high of the past 2 years.

The positives:  The secondaries continued to outperform the blue chips last week.  The Russell 2000 closed at an all-time high for the first time since early March.

The chart below 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 neutral 50% level.

NY HL Ratio at 96.4% is at its highest level in over a year.

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.

OTC HL Ratio rose to 85.6% on Friday.

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

Conclusion:

The picture for the coming week is anything but clear.

The market is overbought at new highs.

Seasonally the market has been up more often than not but the average returns have been weak.

I expect the major averages to be higher on Friday July 11 than they were on Thursday July 3.

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.

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