Technical Stock Market Report

February 20, 2016

The good news is:  Last week new lows nearly disappeared again.

The Negatives:  In late January new lows all but disappeared returning a couple weeks later.  They disappeared again last week.  If the pattern repeats we should see another week of non-threatening levels of new lows and rising prices.

The first chart covers the past 6 months showing 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 made it nearly to the neutral line last week.

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 reached its highest level in over a month, but finished the week at a very negative 23%.

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH), in green.

NY NH fell from a low level while the SPX rose last week.

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

OTC NH continued to show no signs of life.

The positives:  New lows declined to mid-double digits last week from mi- triple digits the week before.

The chart below 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 is showing a nice pattern of higher highs and higher lows.

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 tumbled last week.

Conclusion

Last week’s rally was spectacular, new lows disappeared and the secondaries led the way up.  You do not expect much from new highs coming off a bottom, but they declined on the NYSE last week.  I believe we are seeing a bear market rally that could continue for a few more weeks.

I expect the major averages to be higher on Friday February 26 than they were on Friday February 19.

Last week’s negative forecast was a miss.

********

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

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.
 
Dollar falls on uncertainty but ends week with modest gain