Technical Stock Market Report

The good news is:  The market has had five consecutive winning weeks.

The Negatives:  The market is overbought.

In the past 5 weeks the Dow Jones Industrial Average (DJIA) ,  and NASDAQ composite (OTC) have both been up 12.4%, the S&P 500 (SPX) has been up 12.1% and the Russell 2000 (R2K), up 15.5%.

The NYSE and NASDAQ markets continue to performing differently internally with the NASDAQ weaker than the NYSE.

The first chart 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 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 was again, for all practical purposes, unchanged last week at a slightly above neutral 56.9%.

The positives:  New lows remained benign on the NYSE and a little worse on the NASDAQ.  New highs got into triple digits on the NYSE for the 1st time in 3 months (a lot of utilities on the new high list).

The chart below is similar to the 1st chart except it shows the 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 90.8%.

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

OTC NH turned up sharply at the end of last week.

The next chart is similar to the one above except it shows the SPX in red and NY NH, in green, has been calculated from NYSE data.

NY NH is at its highest level since last summer.

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).

NYSE new lows have, for all practical purposes, disappeared.

The next chart is similar to the one above except it 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, but the numbers are not quite as good.

Money Supply and yield curve

The money supply and yield curve charts were provided by Gordon Harms.

Money supply growth has declined a bit to slightly above its long term trend.

An inverted yield curve (short term rates higher than long term rates) has been the best predictor of a recession.

These days with the Fed holding short term rates at 0 it will be difficult for the yield curve to invert.  However, the chart below, which covers the past 15 years, shows yields of the 2yr, 5yr, 10yr and 20yr treasuries coming closer together.

Conclusion

After 5 consecutive up weeks the market is overdue for a rest, but seasonally the 4 days prior to Good Friday have been pretty strong.

I expect the major averages to be higher on Thursday March 24 than they were on Friday March 18.

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.