Technical Stock Market Report

December 20, 2014

The good news is:  New lows disappeared last week.

The negatives:  All of the major indices closed within 1% of their all time or multi year highs on Friday.  The breadth indicators, most importantly new highs, did not keep up.

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 failed to keep up with the abrupt increase in prices.

The next chart is similar to the one above except is covers the past year.

Longer term OTC_NH looks worse.

The next chart is similar to the first chart covering the past 6 months except is shows the SPX in red and NY NH has been calculated from NYSE data.

NY NH is also lagging prices.

The next chart is similar to the one above except it covers the past year.

With the SPX only 0.2% off its all time high NY NH is a long way from its high of the past year.

The positives:   New lows disappeared last week, falling from 434 Tuesday to 22 Friday on the NYSE and 228 Tuesday to 51 Friday on the NASDAQ.  That move was enough to push the high/low ratios on both exchanges into positive territory.

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 of the indicator, the line is solid at the neutral 50% level.

OTC HL ratio rose to a positive 57% on Friday.

The next chart is similar to the one above except is shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio also rose sharply, finishing the week at 66%.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth slowed down again remaining below its long term trend.

Conclusion

The next 2 weeks are seasonally strong with very low volume.

I expect the major averages to be higher on Friday December 26 than they were on Friday December 19.

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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 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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