Technical Stock Market Report
The good news is: The Santa Claus rally is scheduled to begin around the middle of next week.
The negatives: New highs deteriorated on both the NYSE and NASDAQ last week while new lows were pretty steady on the NASDAQ and rose significantly on the NYSE. Most of the new lows on the NYSE were fixed income issues.
The chart below 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 and dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.
NY HL Ratio continued its fall finishing the week at a solidly negative 31%.
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 sharply last week.
The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NH, in green, has been calculated from NASDAQ data.
OTC NH also fell sharply last week.
The positives: The market is oversold and due for a bounce.
NASDAQ breadth data has held up better than NYSE breadth data.
The next chart is similar to the first one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.
OTC HL Ratio fell sharply last week closing at, a still positive, 61%. Near its low of the past 5 months.
Money Supply (M2): The money supply chart was provided by Gordon Harms.
Money supply growth leveled off at the trend last week.
Conclusion: The market is oversold and the annual Santa Claus rally is scheduled to begin mid to late next week.
I expect the major averages to be higher on Friday December 20 than they were on Friday December 13.
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Disclaimer: Mike Burk is an employee and principal of Alpha Investment Management (Alpha) a registered investment advisor. Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy. Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) 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.