Technical Stock Market Report

February 23, 2014

The good news is:  The NASDAQ composite (OTC) closed at a multi year high on Tuesday and, last week, the secondaries were stronger than the blue chips.

The negatives:  New highs increased last week, but remain below their levels of a month ago when the major indices were all making new highs.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH is well below its level at the previous high for the OTC, a month ago.

The next chart is similar to the one above except is shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated from NYSE data.

NY NH has also had progressively declining highs since last October.

The positivesNew lows have disappeared and nothing really bad happens without new lows increasing.

The chart below 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 neutral 50% level.

OTC HL Ratio finished the week at 90%.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

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 also finished the week at 90%.

Money Supply (M2):   The money supply chart was provided by Gordon Harms.

Money supply growth has been following its trend pretty closely.

Conclusion:  The market was mixed last week, the secondaries were strong while the blue chips were weak.  The breadth indicators were ok.  New highs came up a little short while new lows remained dormant.

I expect the major averages to be higher on Friday February 28 than they were on Friday February 21.

Last week the Dow Jones Industrial Average and the SPX were down a little while the OTC and Russell 2000 were up so I am calling last weeks positive forecast a tie.

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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.

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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