Technical Stock Market Report

August 15, 2015

The good news:  The equity market held up pretty well considering the turmoil in the FX market.

The negatives:  New lows held at uncomfortably high levels last week while new highs remained insignificant.

The first chart 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.

The OTC is only 3.3% off its all time high while OTC NH is falling off the bottom of the chart.

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

The SPX is only 1.8% off its all time high while NY NH is rolling along the bottom of the chart.

The next chart covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

NY HL Ratio finished the week at a weak 29% and appears to be going nowhere.

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

OTC HL Ratio at 33% is only slightly stronger than NY HL Ratio and also appears to be directionless.

The positives:  The turmoil in the FX market last week probably contributed to volatility  in the equity markets.  New lows declined a little last week, but not in a way that would suggest a bottom.  Next week seasonality is modestly positive.

The chart below covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue.  NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved upward last week, but not in a very convincing way. 

The next chart is similar to the one above except is shows the OTC in blue and OTC NL, in orange, has been calculated from NASDAQ data.

OTC NL has been a little weaker than NY NL, but both rose last week.

  

Money supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth has been declining at its trend.

Conclusion

There is not much to go on this week.  Both the breadth indicators and seasonality are indecisive, but both are modestly positive.

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

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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