Technical Market Report

The good news is:

The Dow Jones Industrial Average (DJIA) closed at an all time high last Wednesday.

?The Negatives

The DJIA is made up of the bluest of the blue chips. As the market heads for a cyclical top there is a flight to quality as lower quality issues begin to falter.  Last Wednesday the DJIA closed at an all time high that was not confirmed by anything. There could be more new highs for the DJIA in this cycle, but until new lows begin to diminish rapidly, those new highs will be marginal.

The first chart covers the past 9 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.

 I extended the duration of this chart to 9 months to show the progressive deterioration of OTC NH while the index was rising. These are likely to be the last new high charts I show for a while. New highs are only relevant in up markets.

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

 NY NH has not confirmed the increase in prices for months. 

 The next chart covers the past 6 months showing the OTC in blue and a 10% trend of Nasdaq new lows (OTC NL) in brown. OTC NL has been plotted on an inverted Y axis so diminishing numbers of new lows move the indicator upward (up is good).

OTC NL is headed downward. When a bottom has been reached new lows dramatically disappear and OTC NL will head upward.

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

The only good thing about this chart is it should be easy to tell when this cyclical decline has been completed.

 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.