We received several questions about Tuesday night’s (May 27, 2003) rather convoluted explanation of higher highs and higher lows regarding Nasdaq, SP500, and DJ30. In looking at what was written versus what was meant, we can see the confusion. Here is another stab at it.

During the downtrend there was a series of lower highs and lower lows. That is pretty much the definition of a downtrend. During a strong, entrenched decline, there are often sharp rallies, but they simply take the indexes up to the down trendline. As that trendline slopes down, when the index hits that down trendline and tops, the top will be lower.

On Nasdaq, the last lower high was in August. It broke that high in November. Its recent move put it not only over the August high but it made a new post-October high as well. The SP600 small cap index just cleared its August high Wednesday by a gnat’s rear end. The Russell 2000 small cap index looks the best of all, having already beaten its August high and easily at a new post-October high. SP500 still has not been able to make a high greater than the August high. Technically that leaves it in the same downtrend. DJ30 is in the worst shape as it still struggles to get over the January nad December highs.

What the higher highs and lower lows show is an uptrend. When that occurs with solid price/volume action as we have seen in this rally, it is a solid uptrend. When the 10, 18, 50, and 200 day MVA are all stacked up on top of one another in that order and sloping higher together, that is a strong uptrend. The Nasdaq and Russell 2000 200 day MVA are just now trying to turn higher. It is a late confirmation as all longer term MVA’s are, but it is an important confirmation as it is hard to disrupt that trend as the long downtrend showed us.