Technical Market Report - Monday, January 21

The good news is:​ The secondaries are leading the way up.

The Negatives

The market is overbought.
All of the major indices are up 13% to 17% since the December 24 low.

The chart below covers the past 18 trading days showing all of, what I consider to be, the major indices plus the S&P mid cap index (MID).  Dashed vertical lines have been drawn on the 1st trading day of each week

The stratification of change is exactly what you like to see at the beginning of an upward move. The Russell 2000 (R2K) is leading the way upward followed by the NASDAQ composite (OTC), the S&P mid cap (MID), the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA) following the rest upward. The negative is; the rate of change cannot be sustained.  On an annualized basis the R2K is moving upward at a rate of 83% a year while the DJIA, the laggard, is gaining at a 71% rate. 

The Positives

New lows have been minimal while new highs are beginning to show a little life.

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 vertical lines have been drawn on the first trading day of each month. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

 NY HL Ratio continued its upward move. 

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

OTC HL Ratio has stalled because there have not been enough new highs to take the indicator any deeper into positive territory.

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 continued moving sharply upward.

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