Technical Stock Market Report

March 15, 2014

The good news is: In spite of a rough week for the major averages, new lows increased only modestly.

The negatives:  The number of new highs declined sharply last week.

The chart below covers the past 6 months showing the NASDAQ composite (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 fell last week adding to its pattern of progressively lower highs.

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 has a pattern of progressively lower highs over the past 5 months.

The positivesNew highs outnumbered new lows every day last week.

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 fell last week, but remains strong at 78%.

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 fell from 95% to 65% last week. 

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth continued its decline last week.

Conclusion: Some comfort can be taken from the low number of new lows, but there is no evidence the recent decline has ended.  The seasonal pattern calls for a top around mid April.

I expect the major averages to be higher on Friday March 21 than they were on Friday March 14.

Last week’s positive forecast was a miss.

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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 (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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