Markets staged a fairly decent rally recently with both the DOW and S&P 500 moving to their highest levels since May, while the NASDAQ is trading at its highest point since early July. Given the rally, all four of our key market barometers are above their returns for 2005.
Take a look at market sentiment as reflected by the new high-new low ratio (NHNL), a measure of the number of stocks touching a new 52-week high versus the number of stocks that have declined to new 52-week lows. Readings above 70% are bullish while below 20% is bearish. The NHNL ratio on the NYSE has been week over the last few weeks but the last three sessions were over the bullish 70% level. Since May 10, there have been only five readings at above 70%. The current trend is appears to be trending higher.
I will now take a look at each of the four key indices I follow.
On the tech front, the NHNL ratio for the NASDAQ showed some positive signs including a 58% reading recently. Sentiment on the NASDAQ is weaker than the NYSE. We still have yet to see a 70% plus reading since July 3. The NASDAQ sentiment appears to be holding.
On the tech front, the near-term signals are moderately bullish versus moderately bearish the prior week. The Relative Strength is strong and suggests more gains ahead.
Breadth as indicated by the advance-decline line (A/D) was strong last week with four straight sessions coming at above 1.0. The five-day MA surged to 1.65 versus 0.77 the prior week. The short- term trend remains down but watch for any signs of a reversal.
The NASDAQ rebounded back above its 20-day MA of 2074 as well as its 50-day MA of 2099. Above this is the upside target at the 100-day and 200-day MA at 2191 and 2225, respectively. The near-term trend is up.
On the blue-chip side, the near-term technical picture for the large- cap DOW is bullish versus neutral the prior week. The Relative Strength is relatively strong.
The chart showed a bullish double bottom that we indicated in recent weeks. The index rebounded back above 11,300 and its 100-day MA at 11,154. The 20-day and 200-day MA is at 11,135 and 11,021, respectively. On the upside is resistance at 11,413 and the 13-week high at 11,460.
Near-term technical signals for the broadly based S&P 500 are bullish versus neutral the prior week. The Relative Strength is relatively strong. The index is broke above its 20-day MA at 1,270 as well as its 100-day and 200-day MA at 1,276 and 1,272, respectively. Watch for a break at 1,300. Above this is resistance at the 14-day 70% RSI at 1,316.
On the small-cap side, the near-term technical signals for the Russell 2000–a barometer of small-cap performance and the economy–is moderately bullish versus bearish the prior week. The Relative Strength is relatively strong. The index is back above its 20-day MA of 691. Upside targets include 200-day and 100-day MA at 712 and 722, respectively. Watch the chart as we may be seeing a bearish descending triangle.