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Technical Market Report

The good news is:
 • There has been a very limited build up of new lows on theNYSE in spite of a rather nasty week for prices.

The chart below covers 2 years showing the NASDAQ composite in red and a 10% trend (19 day EMA) of NYSE new lows in blue. The Y axis for the new low indicator is inverted so the indicator moves downward when new lows increase. The indicator lags too much for short term timing, but, at least for now, it is not signaling a problem.

The same chart plotting NASDAQ new lows is not as pretty. A rule of thumb for "worrisome levels" of NASDAQ new lows is 70 which was exceeded every day last week.

A similar divergent picture can be seen in the NYSE and NASDAQ AD lines. In the chart below which begins the first of this year, the NASDAQ AD line which is in olive drab, peaked in late January and has been trending downward ever since, although it has not yet exceeded its May low while the NYSE AD line peaked near the first of April and is not far from its April peak.

A common topping pattern in market cycles is the blue chips moving to new highs as the small caps deteriorate. The charts above suggest that change of leadership could be underway.

For the short term, several important short term indicators shifted early last week. Summation indexes are the accumulation of oscillator values, when the oscillator is above 0 the summation index moves upward and when it is below 0 the index moves downward. The chart below shows summation indices calculated from oscillators of NASDAQ advances & declines, new highs & new lows and upside & downside volume. As of early last week all of the summation indices turned sharply downward.

A 10% trend of NASDAQ new highs (shown in green in the chart below) provide an easy short term read on market direction. That indicator has turned downward.

Seasonally next week is not favorable for the bulls.

Report for the week of options expiration for July.
Options expiration the 3rd Friday of the month.
Option expiration Friday is marked *Fri*.
The number following the year is its position in the presidential cycle.

Russell 2000
Year Mon Tue Wed Thur *Fri*
1989-1 0.30% -0.08% 0.71% -0.13% 0.02%
1990-2 -0.01% -0.67% -0.61% -0.49% -0.13%
1991-3 0.61% 0.04% 0.10% 0.57% 0.34%
1992-4 -0.73% 0.39% -0.44% 0.17% 0.18%
1993-1 0.39% 0.20% 0.63% -0.13% -0.58%
1994-2 -0.11% 0.19% 0.62% 0.88% -0.06%
1995-3 0.37% -0.80% -2.22% 0.82% 0.38%
1996-4 -2.77% -1.46% 2.60% 1.49% -0.43%
1997-1 -0.60% 0.67% 0.36% 0.13% 0.09%
1998-2 -0.10% -1.25% -1.14% -1.91% -0.85%
1999-3 0.29% -0.26% 0.73% 0.94% -0.12%
2000-4 0.47% -1.63% -1.57% 1.31% -2.25%
2001-1 -1.41% 1.40% -1.42% 0.81% 0.08%
2002-2 -1.02% -0.44% 0.59% -3.17% -2.65%
2003-3 -1.63% 1.49% 0.46% -0.19% 0.78%
Avg -0.40% -0.15% -0.04% 0.07% -0.35%
Win% 40% 47% 60% 60% 47%
 
S&P 500
Year Mon Tue Wed Thur *Fri*
1989-1 0.18% -0.33% 1.32% -0.66% 0.72%
1990-2 0.45% -0.39% -0.90% 0.30% -1.02%
1991-3 0.56% -0.22% -0.09% 1.10% -0.30%
1992-4 -0.45% 0.00% -0.68% 0.28% -0.12%
1993-1 0.19% -0.20% 0.44% -0.19% -0.77%
1994-2 -0.33% -0.02% 0.17% 1.04% 0.17%
1995-3 0.51% -0.76% -1.34% 0.46% 0.01%
1996-4 -2.54% -0.23% 0.91% 1.50% -0.75%
1997-1 -0.26% 2.30% 0.28% 0.40% -0.16%
1998-2 -0.22% -1.61% -0.08% -2.09% 0.09%
1999-3 -0.30% -0.40% 0.33% 0.82% 0.65%
2000-4 0.03% -1.11% -0.79% 0.92% -1.03%
2001-1 -1.09% 1.00% -0.55% 0.61% -0.34%
2002-2 -0.38% -1.84% 0.55% -2.70% -3.84%
2003-3 -1.46% 0.95% 0.05% -0.71% 1.74%
Avg -0.34% -0.19% -0.03% 0.07% -0.33%
Win% 40% 27% 53% 67% 40%

I expect the major indices to be lower on Friday July 16 than they were on Friday July 9.

All of the major indices were down last week making my positive forecast for last week another loss.

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