MARKET ADVANCE EXCEEDS 52 WEEKS - NET NEW HIGHS EXPAND IN MARCH - EARLY SIGNS OF RELATIVE WEAKNESS IN SMALLCAPS - IWM STALLS AS MACD ROLLS OVER - NASDAQ NET ADVANCES HIT HARD THIS WEEK - NYSE AD VOLUME LINE FORMS SMALL NEGATIVE DIVERGENCE

MARKET ADVANCE EXCEEDS 52 WEEKS ... Link for todays video. Net New Highs on the NYSE and Nasdaq were exceptionally strong this month. This is hardly surprising considering that the current advance turned 1 year old in March. Perfchart 1 shows performance for the major indices since early March 2009. These performance lines increase from the lower left hand corner to the upper right hand corner. There were pullbacks in June-July and January-February, but the performance lines moved to new highs this month - new 52-week highs that is. In just over a year, the Russell 2000 ($RUT) is up almost 100%, the Nasdaq is up almost 90% and the NY Composite is up around 75%. The energy intensive Amex is the laggard with a gain of 50%.

Chart 1

NET NEW HIGHS EXPAND IN MARCH... With the major indices rising for over 52 weeks now, the number of stocks recording new 52-week highs expanded in March. Chart 2 shows Nasdaq Net New Highs in the bottom indicator window. Net New Highs held above +100 and surged above +200 throughout the month. The blue line shows the 10-day SMA of Net New Highs rising above its January high as Net New Highs averaged around +180 for the month. A downtrend in the Nasdaq is simply not possible as long as new 52-week highs exceed new 52-week lows. Net New Highs dipped into negative territory twice in the last six months, but both dips were short lived and the 10-day SMA never turned negative.

Chart 2

Chart 3 shows NYSE Net New Highs in the bottom indicator window. Net New Highs have been bouncing from +200 to +500 this month. There are around 3160 total active symbols on the NYSE ($NYTOT). With over 500 Net New Highs, this means that over 15% of NYSE stocks hit new 52-week highs this month. Incidentally, there were over 550 new highs on the NYSE last week ($NYHGH). The 10-day SMA for Net New Highs has not been negative since July. Even though stocks are overbought after a seven week run, long-term breadth remains bullish as long as Net New Highs are positive. Click on any of these charts to see the settings and save to your favorites list.

Chart 3

EARLY SIGNS OF RELATIVE WEAKNESS IN SMALL AND MID-CAPS... While the long-term breadth remains bullish and the long-term trends are up, stocks are definitely overbought after sharp seven week advance without a pullback or consolidation. In addition, a close look at some indicators reveals some underlying signs of weakness starting to appear. These signs are not enough to jeopardize the big uptrend, but they could foreshadow this elusive correction in the coming weeks. Chart 4 shows price performance for the major index ETFs over the last 10 days. The pink line shows performance for the Russell 2000 ETF (IWM) dipping into negative territory on March 19th as performance for the other four ETFs remained positive. IWM performance rebounded from this low, but bore the brunt of selling pressure over the last few days. IWM and the S&P 400 MidCap ETF (MDY) are up less than 1% over the last 10 days, but SPY, QQQQ and DIA are up over 1.5%. These smaller gains show that small and mid-caps are starting to lag. The lag is small for now, but it is something to keep an eye on over the next few days.

Chart 4

IWM STALLS AS MACD ROLLS OVER... Chart 5 shows the Russell 2000 ETF (IWM) trading on either side of 68 over the last two weeks (pink line). With this trading range, the 10-day Rate-of-Change dipped to its lowest level since the second week of February (+.38%), which is when the rally began. The rally could be running of steam because +.38% is not much to show for 10 trading days. MACD confirms waning momentum as the indicator moved below its signal line for the first time since mid February. On the price chart, IWM established short-term support with Mondays reversal low and long white candlestick. A move below this low would signal the start of a correction with a first target zone around 64-65. This zone stems from broken resistance, the 38-50% retracement and the rising 50-day moving average.

Chart 5

NASDAQ NET ADVANCES SUFFER SHARPEST DECLINE SINCE EARLY FEBRUARY... Chart 6 shows the Nasdaq AD Line hitting a new 52-week high with the move above its Sep-Oct highs this week. While this affirms the uptrend and bodes well for the bigger uptrend, there was one sign of increased selling pressure within the week. The bottom indicator window shows Net Advances, which equals advances less declines. This indicator forms the basis for the AD Line, which is a cumulative measure of Net Advances. Since the February low, negative dips in Net Advances held above the -1000 mark - until this week. Selling pressure on Wednesday pushed Net Advances below -1000. This alone is not enough to warrant a short-term trend reversal, but it does fire a warning shot because it reflects the most selling pressure since the first week of February.

Chart 6

NYSE AD VOLUME LINE FORMS SMALL NEGATIVE DIVERGENCE... Chart 7 shows the NYSE AD Volume Line hitting a new 52-week high last week and falling short of last weeks high this week. A bearish divergence forms when the security forges a higher high and the indicator records a lower high. The NY Composite closed above last weeks high this week, but the AD Line failed to exceed last weeks high. Because this bearish divergence covers all of one week, it has potential short-term consequences, not long-term consequences. A bearish divergence that stretches 1-2 months would have greater consequences. The indicator window shows Net Advancing Volume hitting the -1000 level last week. As with Net Advances on the Nasdaq, this was the most negative number since the first week of February.

Chart 7