Technical Stock Market Report

September 25, 2016

The Good News Is:  The NASDAQ composite (OTC) closed at an all-time high last Thursday.

The Negatives: New highs failed to confirm last week’s rally.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

This chart is not quite as bad as it looks.

On Thursday the SPX was within 1% of its all-time high and NY NH was well off its early July high, but the value of 102 is still pretty strong. 2 months ago it was 247.

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

NASDAQ new highs have been deteriorating, however OTC NH has been stronger than NY NH and that is a good thing.

The Positives:  New lows decreased and new highs increased last week.

The next 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 horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

OTC HL Ratio rose sharply to 80% last week.

The next chart is similar to the one above 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 86%.

Money Supply (M2) And Interest Rates

The money supply and interest rate charts were provided by Gordon Harms. M2 growth has been accelerating all year.

It is difficult to detect a monthly change in this chart. However, over the past several years the trend has been toward compression and with the Fed talking about raising rates that pattern is likely to continue.


Last week, while the major indices were up, the breadth indicators improved and the secondaries outperformed the blue chips.

I expect the major averages to be higher on Friday September 30 than they were on Friday September 23.

Last week’s negative forecast was a miss.

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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