Technical Stock Market Report

The good news is:  The market had a rough week, but there was no build up of new lows.

The negatives:  Leadership is narrowing.  Although the market averages have been hitting new highs they have been doing it with fewer individual issues hitting new highs.  This narrowing of leadership is symptomatic of a developing top, but it can go on for a long time.

The first chart covers the past 6 months 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 of the 1st trading day of each month.

This chart looks pretty good with OTC NH hitting a high for the period a day or two after prices.

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

Over the past year the number of new highs has declined by about 50% as the index has moved higher.

The next chart is similar to the 1st one except is shows the S&P 500 (SPX) in red and NY NH has been calculated from NYSE data.

This chart is nearly identical to the 1st one.

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

Relatively NY NH has been stronger than OTC NH, however both have been declining as the indices have been rising.

The positives

Although new highs have been declining, new lows have remained at non threatening levels and nothing really bad happens without a significant increase in the number of new lows.

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 declined a bit last week, but closed on the plus side at 60%.

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 also declined, but finished the week at a comfortable 75%.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth picked up a little last week, but is still running below its long term trend.

Conclusion

Last week was weaker than the seasonal average and seasonally, next week has not been up for over 20 years.

I expect the major averages to be lower on Friday January 16 than they were on Friday January 9.

Last weeks positive 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.