Technical Stock Market Report

The good news is:  New lows declined sharply on Friday.

The negatives:  It is too early to tell, but new low numbers on Friday were encouraging.

Friday NYSE new lows declined to 80 on Friday from 262 on Thursday and NASDAQ new lows declined to 72 Friday from 252 on Wednesday.  This is encouraging, but, you want to see less than 40 on the NYSE and less than 70 on the NASDAQ for 5 consecutive days before considering this period of weakness over.

The chart below covers the past 9 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NY 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 the month.

NY NL turned upward on Friday, but remains only slightly off its low for the year.

The next chart is similar to the first one except it shows the NASDAQ composite (OTC) in blue and OTC NL, in red, has been calculated from NASDAQ data.

The pattern of OTC NL is similar to NY NL.

The next chart covers the past 9 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by (new highs + new lows) (NYSE 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 is just off its lowest level of the past several years.

This indicator will recover quickly when a bottom has been reached.

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 is also just off its lowest level of the year.

The positives:  New lows are all that matters…and they declined sharply on Friday.  If we are near a bottom, new lows will continue to diminish next week.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth dropped below the trend last week.

Conclusion

New lows are all that matters and they declined sharply on Friday.

Seasonality turns positive next week.

We may see another low early next week, but, if new lows continue to decline a bottom will be in place.

I expect the major averages to be higher on Friday October 10 than they were on Friday October 3.

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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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