Technical Market Report

By: Mike Burk | Mon, May 12, 2008
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The good news is:
• The secondaries held up better than the blue chips in last weeks decline.

Short Term

The secondaries lead both up and down.

Although all of the major indices declined last week the S&P 500 (SPX) was down 1.81% while the Russell 2000 (R2K) was down only 0.78%.

The chart below covers this year showing the R2K in red and the SPX in green a FastTrack (www.fasttrack.net) relative strength indicator called Accutrack is shown as a histogram on the bottom. Accutrack hit its low a few days ahead of the January price low and last week rose while prices were declining. Although not as extreme as the January example the pattern last week was similar.

Intermediate Term

It is encouraging that volume did not increase during last weeks decline.

The chart below covers the past year showing the SPX in red and a 5% trend (39 day EMA) of NYSE total volume in black. Dashed vertical lines have been drawn on the 1st trading day of each month; the vertical line is red on the 1st trading day of the year. The indicator hit an all time high last August, a 3 year low in October and is again near its 3 year low. Hopefully, volume will pickup on the next rally.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday in May during the 4th year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the 5 trading days prior to the 3rd Friday in May during the 4th year of the Presidential Cycle. NASDAQ (OTC) data covers the period from 1963 - 2007 and SPX data from 1953 - 2007. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.

By most measures the returns for the coming week have been modestly negative.

Report for the week before the 3rd Friday of May
The number following the year is the position in the presidential cycle.
Daily returns from Monday through 3rd Friday.

Year
OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.13% -0.28% 0.25% -0.40% -0.38% -0.68%
 
1968-4 0.67% -0.38% -0.53% -0.07% -0.30% -0.62%
1972-4 0.70% 0.02% -0.46% 0.82% 1.02% 2.09%
1976-4 -0.32% 0.04% -0.31% 0.31% -0.16% -0.43%
1980-4 -0.07% 0.80% 1.08% 0.66% 0.42% 2.89%
1984-4 -0.68% 0.05% -0.13% -1.03% -0.61% -2.40%
Avg 0.06% 0.11% -0.07% 0.14% 0.07% 0.31%
 
1988-4 0.23% -0.29% -1.42% -0.20% -0.06% -1.74%
1992-4 0.23% -0.54% -0.27% -1.02% -0.35% -1.95%
1996-4 1.59% 1.03% -0.07% 0.46% 0.21% 3.22%
2000-4 2.23% 3.05% -1.95% -2.92% -4.19% -3.79%
2004-4 -1.45% 1.13% 0.02% -0.08% 0.82% 0.43%
Avg 0.57% 0.88% -0.74% -0.75% -0.72% -0.76%
 
OTC summary for Presidential Year 4 1964 - 2007
Avg 0.30% 0.42% -0.34% -0.32% -0.33% -0.27%
Win% 64% 64% 27% 36% 36% 36%
 
OTC summary for all years 1963 - 2007
Avg -0.05% 0.06% 0.11% 0.03% -0.24% -0.08%
Win% 47% 47% 60% 51% 43% 49%
 
SPX Presidential Year 4
Mon Tue Wed Thur Fri Totals
1956-4 -0.55% -1.05% -0.69% 1.22% -0.47% -1.54%
1960-4 -0.09% 0.38% -0.04% 0.43% 0.27% 0.96%
1964-4 -0.12% 0.32% -0.23% -0.14% 0.30% 0.12%
 
1968-4 -0.31% -0.07% -0.05% -0.48% -0.72% -1.63%
1972-4 0.45% -0.19% 0.22% 0.98% 0.96% 2.43%
1976-4 -0.25% 0.17% -0.08% 0.81% -0.73% -0.07%
1980-4 0.06% 1.45% 0.52% 0.13% 0.34% 2.49%
1984-4 -0.62% 0.32% -0.01% -0.90% -0.51% -1.72%
Avg -0.14% 0.34% 0.12% 0.11% -0.13% 0.30%
 
1988-4 0.75% -1.28% -1.58% 0.49% 0.18% -1.45%
1992-4 0.59% -0.53% 0.04% -0.79% -0.74% -1.43%
1996-4 1.44% 0.62% -0.03% -0.09% 0.61% 2.56%
2000-4 2.21% 0.94% -1.24% -0.73% -2.10% -0.93%
2004-4 -1.06% 0.68% -0.26% 0.05% 0.40% -0.19%
Avg 0.79% 0.09% -0.61% -0.22% -0.33% -0.29%
 
SPX summary for Presidential Year 4 1956 - 2004
Avg 0.19% 0.14% -0.26% 0.08% -0.17% -0.03%
Win% 46% 62% 23% 54% 54% 38%
 
SPX summary for all years 1953 - 2007
Avg -0.01% 0.10% 0.10% -0.01% -0.13% 0.05%
Win% 50% 56% 51% 51% 49% 51%

Conclusion

Although it could change Monday, there are no indications that the current decline has played out and seasonally next week has been modestly negative.

I expect the major indices to be lower on Friday May 16 than they were on Friday May 9.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

Gordon Harms produces a Power Point for our local timing group meetings. You can get a copy of that at: http://www.stockmarket-ta.com/.

 


 

Author: Mike Burk

Mike Burk

Mike Burk independently publishes a weekly newsletter on the stock market from a technical perspective.

Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy. Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com). Historical data is from Barron's and ISI price books. The views expressed are provided for information purposes only and should not be construed in any way as investment advice. Furthermore, the opinions expressed may change without notice.

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