Technical Stock Market Report

The good news is:  The European Central Bank promised a massive injection of liquidity that will last nearly 2 years.

The negatives:  One of the breadth patterns we look for in a bull market is expanding new highs and diminishing new lows.  The market is split on that score.  The NYSE is looking pretty good while the NASDAQ is not.

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 on the 1st trading day of each month.

OTC NH did not respond during last weeks rally.

The longer term picture is even worse.

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

OTC NH has been weakening for quite a while.

The positives:  Last week new lows declined significantly from the week before.

The numbers of new lows are still a bit discomforting, however their direction is positive.

The chart below covers the past 6 months showing  the SPX in red and a 40% trend 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 rose to a comfortable 81% on Friday.

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 issues. 

OTC HL Ratio at 47% is still a little below the neutral level, but it turned sharply upward last week.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth fell last week.

Conclusion

The ECB came to the rescue last week promising a gush of liquidity for the next 2 years.  That action may allow our own FED to proceed with their announced intention of raising rates later this year.  Liquidity no matter where it comes from is a positive for the market.  Seasonally we have several strong weeks to look forward to.

I expect the major averages to be higher on Friday January 30 than they were on Friday January 23.

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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.