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Technical Stock Market Report

January 16, 2016

The good news is: The declines last week were only about 1/3 of what they were the week before.

The negatives: New lows are at dangerous levels.

The chart below covers the past 6 months showing the S&P 500 (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). Dashed vertical lines have been drawn on the 1^st trading day of each month.

NY NL is at its lowest level since March 2009 and moving downward.

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

OTC NL looks a little worse then NY NL and is also at its lowest level since 2009.

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.

At 2.3% NY HL Ratio is about as low as it can go.

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 is also about as low as it can go.

The positives: It will be easy to identify when this period of weakness is over…as new lows will quickly disappear.

Money supply (M2) & Yield curve

The charts were provided by Gordon Harms.

Money supply growth declined a bit.

Conclusion

The market remains in free fall.

New lows are the only measure that matters…and they will quickly disappear when this period of weakness ends.

I expect the major averages to be lower on Friday January 22 than they were on Friday January 15.

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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.