|
The SPREAD failed to set another new all-time
for week 42
The SPREAD closed off 16.73 percent from the all-time
high, by definition, correction territory
The SPREAD closed
Friday, 5/9/08, at 1299.78, off -15.74, or - 1.17% this past week vs up + 20.76,
or + 1.60% the
previous week. The 52 week high and all-time closing high is 1560.89 on 7/13/07. The 52 week low is 1163.93, set on 3/10/08.
The index is off - 261.11 (- 16.73%) points
from the all-time high, as of today.
We are watching
the VL and the NY bouncing off the trend line (chart above), but it should have moved below first. This failure
to drop under the line tells me the markets are getting ready to fall quickly.
When one index,
such as the VL, keeps moving in one direction and the other, such as the NY, moves little, the distance between
the two (spread) continues to grow, or shrink if the VL is falling.
Since both indices
are still the same basic market, one can't continue in one direction without the other forever, but a continuing
shrinking SPREAD means the Value Line Index is falling faster, which also means the big OTC stocks are falling
faster, when compared to the NY, and the markets tend to correct when the big OTC stocks, a part of the VL index,
loses ground faster than the NY.
The SPREAD finished the 26th straight
week closing off more than 10% discount to the high.
Closing off -15.74, or - 1.17%, on the week, makes the broad index off
- 44.74, or - 3.33%,
on the year. The SPREAD closed up
+ 6.64%, year-end
2005, up + 14.04%, year-end 2006 and
off - 2.08%
, year-end 2007.
The 30 day trend
turned bullish
6 weeks ago after remaining bearish 5 weeks after being bullish for 4 weeks. The 90 day trend turned bullish 2 weeks ago after being bearish 1 week after being bullish for 3 weeks. The 180 day trend turned bearish 34 weeks ago after staying bullish for 44 weeks after staying bearish for 17 weeks. The 1 year trend turned bearish 23 weeks ago after being bullish for 226 weeks, after being bearish for 35 weeks.
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.
|
