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Weekly Charts

New High/New Low Ratio M.A. Charts

Week Ending December 22, 2017

Merry Christmas to all from Weekly Charts. This next-to-last week of 2017 has once again seen a Dow Theory confirmation of the bullish stock market trend. The Dow Industrial Average produced another new all-time daily-close price high this past Monday, December 18 at 24,792. Its companion Dow Transportation Average produced its new all-time daily-close high just yesterday, December 21 at 10,629. Simultaneously-made or nearly simultaneously-made new 52-week price highs by these two Dow-Jones averages has long been a bullish stock market trend confirmation technical indicator and it has provided many such confirmations during the month of December. Both Dow averages are sporting weekly price rises at this hour. The Industrial Average is currently up by approximately +100 points from its Friday, December 15 weekly-close price and the Transportation Average is up by approximately +220 points for the week. The S&P 500 Index currently sports a weekly gain of approximately +6 points but is heading downward and might end the day and week virtually unchanged. The NASDAQ Composite Index like to S&P 500 only has a slight gain of +13 points at this hour and could lose that weekly gain by the end of trading today. The two Dow averages have clearly outperformed the other two stock indices for the week.

This somewhat mixed performance by the four major stock market barometers is reflected in this weeks movements by the six moving averages of the daily ratio of new 52-week highs on the NYSE divided by that days total of both new highs and new lows regularly constructed and tracked by this newsletter. Even the two shortest-term 10-day and 20-day moving averages produced very different weekly results. The 10-day moving average rose to 81.0% from 74.0% on December 15, thus reversing a two-week decline. The longer 20-day moving average is ending this week exactly unchanged from its December 15 level of 78.5%. On a daily-close basis the 20-day moving average peaked on Monday, December 18 at 79.5% and has slipped downward by -1.0% since this past Monday. Our regular table this week will show that there will be an excellent prospect that both short-term new high/new low ratio moving averages will fall simultaneously in the upcoming week of December 26-29. Since this is the week that traditionally sees a Santa Claus Rally a simultaneous decline by both short-term new high/new low ratios would contradict this widely-held Wall Street belief that the week between Christmas Day and New Years Day is always and forever destined to produce rising stock prices.

Beyond the strictly short-term time frame of the past 20 trading days, longer-term moving averages of daily new high/new low ratios also produced mixed and conflicting weekly results. The short intermediate-term 50-day moving average fell, continuing a decline that started back in the week of November 6-10. The intermediate-term 100-day moving average produced a very slight weekly rise to 74.4% from 74.2% on December 15, thus halting at least temporarily a two-week decline. The long intermediate-term 150-day moving average rose for a second consecutive week, and the long-term 200-day moving average produced a weekly rise that was large enough for us to conclude that it changed its direction of movement to rising from falling. The 200-day moving average rose to 76.1% from 75.0% on December 15, putting that date and level on the board as at least a short-term low inflection point that ended a 9-week decline from an October 13 weekly-close high at 78.4% that was reached at the end of a lengthy 16 week upward trend.

Our regular table this week will strongly suggest that over the next two weeks through Friday, January 5 the shorter-term and long-term moving averages of daily new high/new low ratios will continue to conflict in terms of direction of movement. The 10-day through 50-day moving averages will likely decline while the 100-day through 200-day moving averages will be likely to rise. The lengthy history of S&P 500 and Dow Industrial price movement direction under such circumstances does provide at least one consistent conclusion. A major intermediate-term price correction has never taken hold unless and until all six new high/new low ratios have been falling simultaneously. That condition will be highly unlikely to develop in the foreseeable future.

Our regular table showing closing kevels for the six new high/new low ratio moving averages today and on December 15, their direction of movement for this past week, and upcoming average daily ratios due to drop and be replaced in their respective moving average calculations for the next two weeks through Friday, January 5 is below.

Moving Average Dec. 22 Close Dec. 15 Close Direction and Net Change Replacement, Dec. 26-29 Replacement, Jan. 2-5

10-day 81.0% 74.0% Up +7.0% 77.0%/day 83.5%/day

20-day 78.5% 78.5% Unchanged +0.0% 81.0%/day 74.1%/day

50-day 74.6% 75.0% Down -0.4% 86.6%/day 80.8%/day

100-day 74.4% 74.2% Up +0.2% 69.9%/day 31.5%/day

150-day 75.9% 75.1% Up +0.8% 82.0%/day 79.8%/day

200-day 76.1% 75.0% Up +1.1% 70.1%/day 66.6%/day

The December 15 closing levels for the 10-day, 100-day and 200-day moving averages are colored Green to designate them as at least short-term low inflection points for these three daily new high/new low ratio moving averages. Our two Replacement columns show us that the only one of the three that we can have a relatively high degree of confidence that it will continue to rise through January 5 is the intermediate-term 100-day moving average that will have a very low Replacement average of just 31.5%/day during the first week of January. Upcoming average daily ratios due to be replaced in both the 10-day and 200-day moving average calculations are high enough figures that we cannot be confident that the NYSE will generate new daily ratios equal to or higher than those due to be replaced.

Over the next two weeks through Friday, January 5 in which there will be just 8 days of trading the three shortest-term 10-day, 20-day and 50-day new high/new low ratio moving averages will have very similar 8-day replacement averages of 80.3%/day, 77.6%/day and 83.7%/day. This means that unless the NYSE generates daily new high/new low ratios that average at least 77.6%/day over this two-week forward time period all three moving averages will fall simultaneously. In that event we should expect that the S&P 500 Index and Dow Industrial Average will execute short-term price declines. This forward average daily hurdle rate is a sufficiently high figure that we cannot have any confidence that the NYSE will meet or exceed it. We should therefore not be surprised if the two main U.S. stock market barometers execute a short-term price decline between today and January 5.

Our lead chart this week is one we displayed last week as well. It compares the S&P 500 Index with both the short intermediate-term 50-day moving average of daily new high/new low ratios and the long-term 200-day moving average using weekly-close data since October 2008. As we forecast last week, the shorter-term 50-day moving average of daily new high/new low ratios has this week executed a bearish crossing through and below the long-term 200-day moving average. The 50-day moving average fell to 74.4% from 75.0% on December 15 while the 200-day moving average rose to 76.1% from 75.0%. One week ago the two moving averages were at identical 75.0% levels. Our regular tables two Replacement columns show that upcoming average daily ratios due to drop and be replaced in the 50-day moving average calculation will be much higher daily figures than those due to be replaced in the 200-day moving average calculation. This means that it is virtually a mathematical impossibility that this weeks bearish crossing might be reversed and undone anytime in the foreseeable future.

Dates and arrows colored in Yellow point to all previous bearish crossings made by the 50-day moving average through and below the 200-day moving average starting with the April 15, 2011 bearish crossing. In all prior cases and without a single exception there have been associated S