Technical Stock Market Report

The good news is:  Some of the major indices closed at all-time highs last Wednesday.

The negatives:  Negatives are pretty hard to find.

The market is just marking time.

Precious metals and Retail switched positions from a few weeks ago, that is Gold was cold and now it is hot while Retail was hot and now it is cold.  Health care picked up after a little weakness and energy fell after a little strength.

Pretty boring.

The positives: The breadth indicators remained mostly flat, but at pretty strong levels.

The chart below covers the past 6 months showing the NASDAQ composite (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 vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio has remained flat in the low 90% level for nearly a month.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

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

NY HL Ratio has been flat at around 90% for the past 2 weeks.

OTC data covers the period from 1963 - 2013 while SPX data runs from 1953 - 2013. There are summaries for both the  2nd year of the Presidential Cycle and all years combined.  Prior to 1953 the market traded 6 days a week so that data has been ignored.

The averages for the coming week have been nearly unchanged, however, they have been a little weaker during the 2nd year of the Presidential Cycle than all years combined. 

Conclusion

We are experiencing the summer doldrums in January and there is not much that suggests a change.

I expect the major averages to be higher on Friday January 24 than they were on Friday January 17.

Last week most of the major averages were up a little while the SPX was down a little so I am calling last week’s positive forecast a tie.

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Disclaimer: Mike Burk is an employee and principal of Alpha Investment Management (Alpha) a registered investment advisor. Charts and figures presented herein are believed to be reliable but we 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.