Technical Stock Market Report

October 17, 2015

The good news is:  New lows remained at non threatening levels last week.

The negatives:  Monday will be the 28th anniversary of the October 19, 1987 crash.

Technical conditions are very different now so there is unlikely to be a replay of that event.

New highs are coming up a little short these days, but, more importantly, new lows have disappeared.

About the only suspicious characteristic of this rally has been the secondaries that have been underperforming the blue chips.

The positivesIt was comforting to see the weakness early last week did not generate a significant increase in new lows.

The first chart shows the S&P 500 (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 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.

NY HL Ratio lost a little ground last week, but remained in comfortably positive territory.

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

OTC HL Ratio has been a little weaker than NY HL Ratio, but managed to remain in positive territory.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth has fallen off in the past 2 weeks.


The weakness in the secondaries concerns me a little…but, aside from that, the low of three weeks ago appears to have been a successful retest of the August low and is unlikely to be challenged in the near future.

I expect the major averages to be higher on Friday October 23 than they were on Friday October 16.

Last week’s blue chips were up a little while the secondaries were down a little…so I am calling last week’s negative forecast a tie.


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 (, FastTrack (, Quotes Plus and the Wall Street Journal (  Historical data is from Barron’s and ISI price books.  The views expressed are provided for information purposes only and should not be construed in any way as investment advice.  Furthermore, the opinions expressed may change without notice.

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Mike Burk began developing equity trading systems in the early 1980's.  Through the 1990's he marketed an equity trading system called MIRAT based on breadth indicators, but, primarily new lows.  In the early days of this century he developed the seasonal trading strategies currently used by Alpha Investment Management of Cincinnati.  Mr. Burk has been writing equity market newsletters since the early 1990's.  During the past 10 years the letter observes both breadth and seasonal strategies.
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