Technical Stock Market Report

The good news is: The market has had three consecutive winning weeks with the secondaries outperforming the blue chips.

The Negatives: The market is overbought. The Dow Jones Industrial Average (DJIA) has been the worst performer of the major indices and it has been up 8.6% in the past 3 weeks.

The Russell 2000 (R2K) has been the best performer of the major indices, up 13.4% in the past 3 weeks.

There are no visible negatives, it is all seashells and balloons.

The positives: New lows declined to benign levels last week.

The first chart covers the past 6 months showing the NASDAQ composite (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 vertical lines have been drawn on the 1st trading day of each month.  Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

OTC HL Ratio hit positive territory for the 1st time in 3 months.

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

NY HL Ratio hit a very comfortable 83% Friday, its highest level in nearly a year.

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL continued its sharp move upward.

The next chart is similar to the one above except is shows the OTC in blue and OTC NL, in orange, has been calculated from NASDAQ data.

OTC NL is showing a similar pattern to NY NL.

Money supply (M2)

The charts were provided by Gordon Harms.

Money supply growth picked up a little last week.

Conclusion

Over the past three weeks the market has gained on average about 10% --  and consequently is overbought.  Seasonally next week has been mixed and never up for more than two consecutive periods and the OTC was up the last two periods so, by that measure, is due for a down week.

I expect the major averages to be lower on Friday March 11 than they were on Friday March 4.

********

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.

You may reproduce these letters provided you include a citation along with a link to the subscription page: http://www.stockmarket-ta.com/signup.html