Technical Market Report

By: Mike Burk | Sat, Jan 17, 2009
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The good news is:
• Money supply is growing at an extreme rate and that should help the equities market.

Short Term

There is an indicator developed by Joseph Granville called Net Field Trend (NFT). NFT is the number of issues in an index with a negative field trend subtracted from those in a positive field trend. The field trend is determined by looking at On Balance Volume (OBV) of each issue. OBV is a running total of volume of an issue added to the total on up days and subtracted from the total on down days. The field trend is positive when there have been two progressively higher highs and two progressively higher lows in OBV. It is negative when there have been two progressively lower highs and two progressively lower lows in OBV. If neither pattern can be resolved the field trend for the issue is neutral.

High readings of this indicator are unusual because a big counter trend day usually sets the indicator to neutral.

The report below is a ranking of the major indices by various criteria including NFT. What caught my eye is after two consecutive up days all of the NFT values are still negative to an extreme. This is not encouraging.

The first group of letters represent the sector name.

All figures are expressed in percent.

Sectors and Indices ranked on a combination of NFT, EMA, MOM and Avg change values NFT (Net Field Trend) When On Balance Volume (OBV) has two progressively higher highs and two progressive higher lows, the trend is positive.

When there are two progressively lower highs and lower lows, the trend is negative. NFT is the number of issues with negative trends subtracted from those with positive trends.

EMA is the % of issues in the sector or index with the price above the EMA in ()
MOM is the % of issues in the sector or index with positive MoMentum - Parameter in ()
Avg var is the average % all of the issues in the sector or index are above or below their EMA
Avg Chg is the mean of the 5, 15, 25 & 35 day % change of the sector or index.

If the sectors or indices are capitalization weighted, that weighting is reflected in the percentages.

Sector Name NFT  EMA(21) MoM(10) Avg var Avg Chg
Util_DJU -35%  60.6%  27.7%  .6%  .8% 
NDX -10%  39.0%  12.1%  -2.4%  .5% 
Sm_R2K -25%  32.4%  19.5%  -2.9%  -.2% 
Mid -36%  35.1%  16.7%  -1.9%  1.5% 
SM_SML6 -27%  28.0%  14.6%  -3.5%  -.1% 
Lg_SPX -41%  32.5%  11.0%  -4.5%  -3.1% 
Lg_OEX -44%  30.7%  8.2%  -5.9%  -4.9% 
Transp_DJT -26%  8.9%  3.6%  -7.0%  -7.7% 
Lg_DJIA -59%  23.3%  6.6%  -4.2%  -3.4% 

Intermediate term

New lows increased last week.

Although the number of new lows at the November low was less than the October low there were still enough to imply a high likelihood of a retest of the November lows.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend of NASDAQ new lows (OTC NL) in black. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good). The indicator turned downward last week. The current value of the indicator is 58 so the indicator will move downward when ever there are more than 58 new lows.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday in January during the 1st year of the Presidential Cycle. This is the 1st time since the market began closing for the Martin Luther King holiday in 1998 the Presidential inauguration has fallen in the same week as the holiday.

The tables show the daily return on a percentage basis for the 5 trading days prior to the 4th Friday in January during the 1st year of the Presidential Cycle. OTC data covers the period from 1963 - 2007 and S&P 500 (SPX) data from 1953 - 2007. There are summaries for both the 1st 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 all measures the period has been modestly positive

Report for the week before the 4th Friday of Jan
The number following the year is the position in the presidential cycle.
Daily returns from Monday through the 4th Friday.

The first table shows every year beginning in 1998.
Years are marked with an asterisk when the MLK holiday fell
in the same week as the 4th Friday.

Year Mon Tue Wed Thur Fri Totals
*1998-2 0.00% 1.74% -0.14% -0.72% -0.04% 0.85%
1999-3 1.30% 2.71% -1.10% 2.93% 1.15% 7.00%
2000-4 -3.29% 1.74% -2.34% -0.74% -3.78% -8.41%
2001-1 -0.45% 2.99% 0.66% -3.67% 0.98% 0.51%
*2002-2 0.00% -2.48% 2.12% 1.05% -0.25% 0.44%
*2003-3 0.00% -0.87% -0.35% 2.12% -3.32% -2.42%
*2004-4 0.00% 0.35% -0.26% -1.09% 0.23% -0.77%
2005-1 -1.26% 0.56% 1.29% 0.05% -0.55% 0.10%
2006-2 0.03% 0.75% -0.20% 0.99% 0.93% 2.50%
2007-3 -0.83% 0.01% 1.43% -1.30% 0.05% -0.63%
*2008-4 0.00% -2.04% 1.05% 1.92% -1.47% -0.54%
 
OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.61% 0.39% 0.62% 0.75% 0.36% 2.72%
 
1969-1 0.24% 0.19% -0.23% 0.02% 0.40% 0.62%
1973-1 -0.54% -0.53% -1.47% 0.00% -0.56% -3.10%
1977-1 0.05% -0.32% -0.57% -0.49% -0.33% -1.65%
1981-1 0.22% -1.42% -0.32% -0.49% 0.71% -1.29%
1985-1 1.28% 0.75% 0.86% 0.60% 0.61% 4.10%
Avg 0.25% -0.27% -0.35% -0.09% 0.16% -0.27%
 
1989-1 -0.43% 0.51% 0.52% 0.78% 0.22% 1.60%
1993-1 0.76% 0.03% -1.31% -0.46% 0.24% -0.74%
1997-1 1.13% 0.93% 0.81% -0.70% -1.06% 1.11%
2001-1 -0.45% 2.99% 0.66% -3.67% 0.98% 0.51%
2005-1 -1.26% 0.56% 1.29% 0.05% -0.55% 0.10%
Avg -0.05% 1.00% 0.39% -0.80% -0.03% 0.51%
 
OTC summary for Presidential Year 1 1965 - 2005
Avg 0.15% 0.37% 0.08% -0.36% 0.09% 0.36%
Win% 64% 73% 55% 50% 64% 64%
 
OTC summary for all years 1963 - 2008
Avg -0.20% 0.02% 0.14% 0.19% 0.06% 0.23%
Win% 53% 47% 52% 50% 69% 60%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.04% 0.50% -0.19% 0.11% -0.19% 0.19%
1957-1 -0.54% 0.29% 0.76% 0.36% -0.47% 0.41%
1961-1 0.55% 0.27% 0.13% 0.15% 1.02% 2.12%
1965-1 0.14% 0.09% 0.33% 0.29% 0.09% 0.94%
 
1969-1 -0.33% -0.06% 0.34% 0.44% -0.05% 0.34%
1973-1 -0.48% 0.01% -1.26% 0.00% -0.24% -1.97%
1977-1 -0.07% -0.12% -0.77% -0.54% 0.14% -1.35%
1981-1 -0.30% -2.02% -0.22% -0.84% -0.02% -3.40%
1985-1 2.28% 0.14% 1.04% -0.33% 0.36% 3.49%
Avg 0.22% -0.41% -0.17% -0.32% 0.04% -0.58%
 
1989-1 -0.74% 1.40% 0.23% 0.88% 0.73% 2.50%
1993-1 0.89% -0.01% -0.42% 0.13% 0.03% 0.62%
1997-1 0.07% 0.77% 0.45% -1.10% -0.91% -0.72%
2001-1 0.03% 1.30% 0.29% -0.50% -0.19% 0.93%
2005-1 -0.35% 0.40% 0.48% 0.04% -0.27% 0.30%
Avg -0.02% 0.77% 0.21% -0.11% -0.12% 0.73%
 
SPX summary for Presidential Year 1 1953 - 2005
Avg 0.08% 0.21% 0.09% -0.07% 0.00% 0.31%
Win% 43% 71% 64% 62% 43% 71%
 
SPX summary for all years 1953 - 2008
Avg -0.13% 0.10% 0.12% 0.19% 0.04% 0.33%
Win% 49% 61% 54% 60% 56% 68%

Money Supply

The chart below as provided by Gordon Harms. Money supply has been growing as fast as it did last March when the fed dealt with Bear Stearns.

Conclusion

The two consecutive up days Thursday and Friday relieved some of the oversold condition of the market without moving the indicators upward very much.

I expect the major indices to be lower on Friday January 23 than they were on Friday January 16.

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Last weeks positive forecast was a miss.

Thank you,

 


 

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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