Technical Stock Market Report

The good news is:  The market is oversold and due for a bounce.

The negatives:  Prices began following the breadth indicators downward last week and there is no evidence of a bottom.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue.  Dashed vertical lines have been drawn on the 1st trading day of each month.  NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved sharply downward last week.

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

OTC NL also moved sharply downward last week.

The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) 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 50%, neutral level.

NY HL Ratio moved downward finishing the week at a very weak 18%.

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 fell to 40%.

The positives

Many of the breadth oscillators are near extremes so the market is due for a bounce.

New lows are at dangerous levels, however, this will make the identification of a bottom easy when it comes because new lows will suddenly disappear.

Money supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth has leveled off at its trend line.

Conclusion

There is no evidence of a bottom. Moreover, seasonally this weakness period is scheduled to last two more weeks.

I expect the major averages to be lower on Friday July 31 than they were on Friday July 24.

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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.