Technical Stock Market Report

July 2, 2016

The good news is: The market has recovered from its BREXIT calamity.

The Negatives:  The market is overbought.

Over the last 4 trading days of last week the major indices were up 5% - 6%.

After hitting record low yields earlier in the week, 10 year treasuries finished the week yielding 1.44%.

The positives: New highs reached significant numbers by the end of last week while new lows disappeared.

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 finished the week at a strong 69%.

The next chart 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 finished the week at 93% very strong.


The market is overbought after an interesting two weeks.  Next week is likely to be dull -- and without much help from seasonality will probably be down a little.

I expect the major averages to be lower on Friday July 8 than they were on Friday July 1.


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 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.

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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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