Technical Stock Market Report

The good news is:  Most of the major indices closed at all time or multi year highs Friday.

The negatives:  The market is overbought.  All of the major indices were up around 5% over the past 2 weeks.

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.

The index closed at a multi year high while OTC NH is well off its recent high.

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

The deterioration in OTC NH has been going on for a long time.

The positives:  New highs increased while new lows remained benign 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 for the indicator.  The line is solid at the neutral 50% level.

OTC HL Ratio finished the week at a very strong 75%.

The next chart is similar to the one above except is shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio finished the week at a very strong 90%.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth accelerated sharply last week.

Conclusion

The market appears to have gotten over its weak January.  Most of the major indices are up around 5% so far in February which makes them, short term, overbought.  The breadth indicators are looking good so there should be more records ahead.

I expect the major averages to be higher on Friday February 20 than they were on Friday February 13.

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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.