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The Trend

The DOW 30

The SPREAD

2017 vs 2016

The Week Ahead

Market Comment

Friday -- October -- 13 -- 2017

The "SPREAD" covers the "broad" market and it is our creation.
It includes the
several thousand stocks on the New York Stock Exchange (NYSE
)
and the approximate
1750 stocks in the Value Line Index (VL)


This
SPREAD is the difference between the two indices. 
The wider the more
"BULLISH"
the market is.
The narrower the more
"BEARISH"
!
The (
#'s on right) and the "Green Bars
" (bottom of chart) are the same.
They show the distance between to two closing points.


Long term SPREAD
View Larger Chart

The SPREAD reached a new all-time high on 10.05.2017

The SPREAD closed Friday 10/13/2017, at 4,673.96, off -19.19 (-0.21%) this past week vs up +49.66 (+1.07%) the previous week. The SPREAD pulled back out of bear market territory 82 weeks ago and out of correction territory 74 weeks ago with a current discount to the 52-week high at off -0.62%. One definition of a correction is a discount to the 52 week high of 10%. A bear market is a discount to the 52 week high of 20%.

The  SPREAD set a new all-time high at 4,703.24 on 10/05/17 and is currently up 10.31% on the year. The 52 week low is 3743.73 set on 11/03/2016. The SPREAD finished 2016 up 23.93%.

We are watching the VL climbing faster than the NY, making the markets more overvalued everyday. These two indices are basically the same market, it's just that one has a few hundred large over-the-counter stocks and the other has no over-the-counter stocks.  When both indices are climbing we get a strong bullish sign for the near term markets, but when both indices are falling we get a bearish sign for the weeks ahead. Its when the VL falls faster than the NY that we have to worry about.

My concern now is since they are the same markets they should never be so far apart. I believe we will see a major drop when VL starts falling faster than the NY.

One thing to note is the chart above covers over 20 years, therefore changes take time, meaning there could still be a few months left for the bull.

The distance between the two (spread) continues to grow, if the VL is climbing faster than the NY, or shrink, if the VL is falling faster than the NY. If we see the NY climbing while VL starts falling we could be seeing the very first sign of a sizable correction starting.

Since
the big OTC stocks are part of the VL index, when the big OTC stocks fall, the VL falls. If the VL is losing ground faster than the NY, it means the big OTC stocks are selling more than the NY stocks. If the VL is climbing faster than the NY, it would mean more buying in the OTC stocks. The SPREAD climbs when the VL is stronger and falls when the VL is weaker. A great way of knowing what side of the market is doing the best.

Closing
, off -19.19 (-0.21%), this past week makes the broad index up +436.75 (10.31%) on the year. The SPREAD closed up (+6.64%), year-end 2005, up (+14.04%), year-end 2006, off (- 2.08%) , year-end 2007, off - (34.52% ), year-end 2008, up (+ 81.74%) , year-end 2009, up ( +33.27%) , year-end 2010, off -123.73, or (-5.80%) year-end 2011, up + 331.45, or (+ 16.50%) year-end 2012, up + 1013.58, or (+ 42.48%) year-end 2013, up + 261.89, or (+ 7.67%) year-end 2014, off -258.76, or (-7.04%) year-end 2015 and up 23.93% for 2016.


The SPREAD is unique to the Stocks in the Spotlight since we designed it in 1090 by producing an "equal value equation" allowing a better view of the longer term markets when comparing the big OTC stocks to the New York Exchange listed stocks.

The
SPREAD covers such a broad market that it offers a look at the "big" picture. The idea behind the SPREAD is that if we see the New York (NY) index rising faster than the Value Line (VL) we know that the stocks traded on the NY are getting more activity but stocks on the Over-The-Counter (OTC) are not getting as much interest.

The reason for this action is because none of the large OTC stocks trade on the NY. No matter how many shares of Microsoft trade, or how many dollars it may change, it will not show up on the NY. Companies such as DELL, Yahoo!, Liz Claiborne, are just a few of the (OTC) stocks not on the NY. Therefore, if the VL rises faster than the NY we know the buying is coming into the big OTC stocks and if we see the VL fall faster we know there is greater selling in the big (OTC) stocks. 

We end up with a theory:

The MARKETS are not able to move very far,  in either direction, without the SPREAD!

The SPREAD tells us the "real game" the whole market is playing.


Our SPREAD index is different than the normal Value Line/New York
Spread due to the fact that we assigned each index equal weight in 1990 when
the VL crossed under the NY, the only time it ever happened. You can keep your own
Spread by subtracting the close of the NYSE from The close of the VL.
The number you will be left with is the actual "difference" between the two indices
or the "SPREAD". (remember that the number will not be
the same as ours, because of our equal weighting, but the concept will be)


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