Technical Stock Market Report

The good news is: All of the blue chip indices closed at an all time high and the NASDAQ composite (OTC) closed at a multi year high on Friday.

The negatives: Bonds had a bad week, the secondaries underperformed the blue chips and new highs continue to come up short of what we would like to see when many of the major indices are hitting new highs.

Advance – Decline lines (ADL) are a running total of declining issues subtracted from advancing issues.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and an ADL calculated from NASDAQ issues (OTC ADL) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

The OTC ADL has had a pattern of lower highs and lower lows since early July.

The next chart 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.

This chart looks pretty good with OTC NH hitting a 6 month high about a week ago.

The next chart is similar to the one above except it covers the past year.

While the OTC was hitting a multi year high OTC NH was at less than half of its high earlier in the year and falling.

The positives:

New lows have remained at non threatening levels

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 of the indicator, the line is solid at the neutral 50% level.

OTC HL ratio fell a little last week, but remains at a positive 62%.

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

NY HL Ratio finished the week at a comfortably positive 80%.

Conclusion:

New highs for the blue chips with only modest support from the breadth indicators is a recipe for a developing top.  Seasonality is positive for the next 2 weeks so we should expect modest gains to continue.

I expect the major averages to be higher on Friday November 28 than they were on Friday November 21.

Last week the blue chips were up and the secondaries were down so I am calling last weeks negative forecast a tie.

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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.