Technical Stock Market Report

April 19, 2014

The good news is: The market was up every day last week bring the blue chip indices very close to their all time highs.

The negatives: Last week the blue chips rallied to very near their all time highs while the secondaries came up significantly short of their recent highs.  The breadth indicators continued to deteriorate.

The chart below covers the past year 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 is at its lowest level in over a year.

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

Last weeks 4 day rally barely arrested the decline in NY NH.

The next chart shows 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 recovered a little with last weeks rally, but remains below the neutral level.

The next chart shows the OTC in blue and a 5% trend (39 day EMA) of NASDAQ downside volume (OTC DV) in red. OTC DV has been plotted on an inverted Y axis so decreasing downside volume moves the indicator upward (up is good).

OTC DV bounced off its lowest point in over a year last week.

The next chart shows the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in red. Like the OTC DV above OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward.

Last week OTC NL hit its lowest point in over a year.

The positives: Breadth has been better on the NYSE than the NASDAQ. By the end of last week NYSE new lows had declined to benign levels.

The chart below shows the SPX, in red, and a 40% trend of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue.

NY HL Ratio rallied to a comfortable 75%.

Money Supply (M2): The money supply chart was provided by Gordon Harms. Money supply growth continued to fall last week.

Conclusion:  We may see a push to new highs for the blue chips early next week, but time is running out.  Everything is in place to suggest we are at or within days of a major top.

I expect the major averages to be lower on Thursday April 25 than they were on Thursday April 17.

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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