Technical Stock Market Report

February 11, 2017

The good news is:  All of the major indices closed at all-time highs on Friday

The Negatives

New highs again failed to confirm the index 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 turned up a little, but failed to confirm the index high by a wide margin.

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

The pattern is similar to the chart above.

The Positives

New lows remained minimal.

The next chart 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 50%, neutral, level.

OTC HL Ratio rose to a very strong 85%.

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

NY HL Ratio also rose, finishing the week at a very strong 92%.

Money Supply (M2) And Interest Rates

The following charts were supplied by Gordon Harms. M2 growth leveled off at its elevated trend last month.

Interest rates have leveled off after their moon shot the previous month.

Conclusion

The breadth indicators were strong last week.

The secondaries hit a new all-time high, but continued to under-perform the blue chips.

Seasonality for the next few weeks remains negative.

I expect the major averages to be lower on Friday February 17 than they were on Friday February 10.

Last week’s negative forecast was a miss.

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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