Taking Measure of the Move

Applying a stock calculation to the major averages yields some eerie results.
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I often try and calculate the upside and downside targets of the major averages using the same sort of calculation I use for stocks.

For stocks, I take the high of the pattern, subtract the low and then add that difference to the breakout level.

I did this exercise for the

Dow Jones Industrial Average

this weekend and came up with a target of 11,576. Then I looked and saw the DJIA closed at 11,577 on Friday. OK, that was sort of eerie.

I did the same thing for the Transports. Their target was 4957; the Trannies closed at 4957 on Friday. Even eerier.

As you long-time readers know, and new readers should be aware, I put more emphasis on my indicators than I do on targets.

I leave all that target calculation to others who are much more sophisticated than I am when it comes to such a process. However, I did want to share that with you, as I found it to be one of those market oddities that we don't often get.

As for the statistics, let's begin with the fact that once again the number of stocks making new highs failed.

If we use the published numbers, then we have the peak reading back on Jan. 27 of 458 new highs that is our highwater mark. Friday's reading was only 398, so still shy of the peak reading.

As you know I also calculate the common stocks to see where they stand. And this is truly fascinating. When we take out all the foreign stocks and REITs as well as anything that is not an operating company, we had 195 new highs. Compare that to April 18, where we had 223, and you have a failure.

However, when I added the foreign stocks and REITs back into the equation, we had more new highs than we had on April 18.

The bottom line is that in all three cases (published numbers, with foreign stocks and REITs or without) there were still fewer stocks making new highs on Friday's rally than there were on Jan. 27, when we had peak readings in this indicator. So this indicator continues to lag.

And yes, the cumulative advance/decline line has still yet to make a higher high while the

S&P 500

has done so rather handily.

And shall we even discuss volume? Friday's volume on the

NYSE

was the lowest since April 24, and for

Nasdaq

it was the lowest since April 17.

So for all of the headlines and all the flashy new highs we saw in the major averages, there are still a lot of problems that haven't gone away.

For this coming week we will be moderately overbought on the NYSE Wednesday, which happens to coincide with the FOMC meeting. I expect there will be further rally attempts in the early part of the week, but by Wednesday much of the momentum from last week's late rally will have subsided.

Overbought/Oversold Oscillators

For more explanation of these indicators, check out The Chartist's

primer.

Helene Meisler writes a technical analysis column on the U.S. equity markets and updates her charts daily. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. At the time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback;

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