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Technical market report for March
6, 2004The good news is:
<P class=MsoNormal
><SPAN
><SPAN
>·<SPAN
>
The NYSE AD line hit a new cycle high last week.
<P class=MsoNormal
><SPAN
><SPAN
>·<SPAN
>
The number of new lows remains insignificant.
<P class=MsoNormal
><SPAN
><SPAN
>·<SPAN
>
Both the NYSE and NASDAQ new high indicators are heading
upward.
This implies new cycle highs in
the blue chip indices in the next 2-6 weeks.
With the high percentage of fixed
income related issues trading on the NYSE and stocks and bonds running out of
synch for several years, there is good reason to be suspicious of the current
value of the NYSE new high indicator.
That said, let’s have a look at it:
The chart below shows the Dow
Jones Industrial Average (DJIA) in red and a 10% trend (19 day EMA) of NYSE new
highs (calculated on a 52 week trailing basis as reported by the exchange) (NH)
in green. I have put dates on
several of the peaks to help with the time perspective.<SPAN
> The indicator does not adjust for the
total number of issues traded so I have included the figures on the selected
dates:
<SPAN
>Date<SPAN
> <SPAN
> Value of NH<SPAN
> Issues <st1:place
w:st="on">Traded<SPAN
> <st1:State
w:st="on">NH as a % of issues
traded
<SPAN
>Nov 82<SPAN
>
219<SPAN
>
1940<SPAN
>
11%
<SPAN
>March 86<SPAN
>
288<SPAN
>
2040<SPAN
>
14%
<SPAN
>July 97<SPAN
>
337<SPAN
>
3440<SPAN
>
<SPAN
> 10%
<SPAN
>Jan 2004<SPAN
>
445<SPAN
>
3430<SPAN
>
13%
Notice the indicator peaks well
in advance of a price peak.
<v:shapetype id=_x0000_t75
coordsize="21600,21600" o:spt="75" o:preferrelative="t"
path="m@x@5l@x@11@x@11@x@5xe" filled="f" stroked="f"><v:stroke
joinstyle="miter"><v:f
eqn="if lineDrawn pixelLineWidth 0"><v:f
eqn="sum 0 0 @1"><v:f
eqn="prod @3 21600 pixelWidth"><v:f
eqn="prod @3 21600 pixelHeight"><v:f
eqn="prod @6 1 2"><v:f
eqn="sum @8 21600 0"><v:f
eqn="sum @10 21600 0"><v:path o:extrusionok="f"
gradientshapeok="t" o:connecttype="rect"><o:lock v:ext="edit"
aspectratio="t"><v:shape id=_x0000_i1025
type="#_x0000_t75"><v:imagedata
src=""
o:title="NY-NH-All"><IMG
src="gif00029.gif">
Take a closer look at the marked
periods:
The chart below shows the period
before and after the 1982 peak. The
indicator peaked at about the half way point of the price run.
<v:shape id=_x0000_i1026
type="#_x0000_t75"><v:imagedata
src=""
o:title="NY-NH-1-79-84l"><IMG
src="gif00030.gif">
The next chart shows the March
86 peak of the indicator followed by a peak in prices about a year and a half
later.
<v:shape id=_x0000_i1027
type="#_x0000_t75"><v:imagedata
src=""
o:title="NY-NH-2-83-87"><IMG
src="gif00031.gif">
The next chart shows the
indicator peak in July of 1997 and the price peak two and a half years later in
January 2000.
<v:shape id=_x0000_i1028
type="#_x0000_t75"><v:imagedata
src=""
o:title="NY-NH-97-2000"><IMG
src="gif00032.gif">
The last chart in this series
shows where we are now. <BR
clear=all>The indicator peaked in late January suggesting there is a lot more
room on the upside.
<v:shape id=_x0000_i1029
type="#_x0000_t75"><v:imagedata
src=""
o:title="NY-NH-2000-2004"><IMG
src="gif00033.gif">
What about next week?
Nearly all of the charts are
telling the same story as the one below.
The indicator (blue) tries to force the activity of the index, in
this case the Russell 2000 (red), into a 25 day cycle.<SPAN
> The indicator is nearly, but not quite
maxed out.
<v:shape id=_x0000_i1030
type="#_x0000_t75"><v:imagedata
src=""
o:title="Rut-25cycle"><IMG
src="gif00034.gif">
I pay a lot of attention to the
direction of the NASDAQ new high indicator (10% trend of NASDAQ new highs) shown
in the chart below. It has turned
upward.
<v:shape id=_x0000_i1031
type="#_x0000_t75"><v:imagedata
src=""
o:title="OTC-NH"><IMG
src="gif00035.gif">
There is no evidence that the up
move of the past 2 weeks is ending, but the recent (past 2 months) rhythm of the
market suggests it does not have much time left.<SPAN
> There are no notable seasonal factors at
play next week.
I expect the major
indices will be higher on Friday March 12 than they were on Friday March
5.<SPAN
>This
report is free to anyone who wants it, so please tell your friends.They can
sign up at:http://www.guaranteed-profits.comIf it is not for you, reply
with REMOVE in the subject line.Thank you,Mike Burk W5/L3/T1
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