Technical Stock Market Report

The good news is:  New lows picked up dramatically last week so we should get a clear signal when this period of weakness is over.

The negatives:  New lows became an issue last week exceeding 100 on both the NYSE and NASDAQ on Thursday and Friday.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in red.  OTC 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.

OTC NL fell sharply last week.  As of Friday’s close the value of the indicator was 63 so it will take fewer than 63 new lows to turn the indicator upward.  You should look for at least 5 consecutive days of the indicator moving sharply upward before assuming the current period of weakness has ended.

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

NY NL also fell sharply last week.  The value of NY NL is 46 so it will require fewer than 46 new lows to turn this indicator upward.

The next chart 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 dropped below the neutral line to its lowest level in a little over 2 months.

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

NY HL Ratio also dropped below the neutral line to its lowest level in nearly 6 months.

The positives: The market is oversold so a bounce would not be surprising.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth has continued to hold close to its trend line.

Conclusion

The blue chips are catching up with the secondaries to the downside.

New lows are the most important indicator now, when bottom has been made, new lows will diminish rapidly.

I expect the major averages to be lower on Friday August 8 than they were on Friday August 1.

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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