Technical Market Report for April 7, 2012

By: Mike Burk | Sat, Apr 7, 2012
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The good news is:
• The S&P 500 (SPX) and Dow Jones Industrial Average closed at multi year highs last Monday.


The negatives

The lack of 52 week new highs (leadership) caught up with the market last week.

The chart below covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

Since early February the SPX and NY NH have been going in opposite directions.

The chart below is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NH has been calculated from NASDAQ data.

This chart looks a lot better than the one above.

The next chart is similar to the one above except it covers the past year.

This picture is not as positive. The recent high of OTC NH was lower than it was a year ago when the index was much lower.

The lack of leadership indicated by the shortage of new highs is a negative, but, as long as the number of new lows is limited price deterioration will be limited. New lows increased last week, but not to threatening levels.


The positives

The long standing rule of thumb for new lows is: There is limited risk until there have been several days of NYSE new lows above 40 and NASDAQ new lows above 70. Those numbers have not been breached recently.

The chart below covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio) in red. Dashed horizontal lines have been drawn at 10% levels of the indicator; the line is solid at the neutral 50% level.

OTC HL Ratio closed at 58% Friday, still above the neutral 50% level.

The chart below is similar to the one above except it shows the SPX in red and NY HL Ratio, in black, has been calculated from NYSE data.

NY HL Ratio has been ratcheting lower for the past month and is and is now lower than it has been at any time since the December low.


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday in April during the 4th year of the Presidential Cycle.

The tables below show the return on a percentage basis for the 5 trading days prior to the 2nd Friday in April during the 4th year of the Presidential Cycle.

OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1953 - 2011. 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.

Next week is the anniversary of the beginning of the 2000 market collapse and could easily be the worst week in market history. In the week of the 1987 crash the OTC fell 19.76% and the SPX fell 9.97%, during the coming week in 2000 the OTC fell 28.16% and the SPX fell 10.87%.

Report for the week before the 2nd Friday of April.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.37% 0.47% -0.31% 0.50% 0.08% 1.10%
1968-4 1.66% 1.09% 0.19% 1.00% -0.55% 3.40%
 
1972-4 -0.03% 0.54% 0.53% -0.08% 0.62% 1.57%
1976-4 0.88% 0.13% -0.82% -0.84% -1.28% -1.92%
1980-4 -0.78% -0.20% -0.46% -0.89% 0.08% -2.26%
1984-4 -0.45% 0.25% -0.68% 0.32% 0.60% 0.03%
1988-4 0.18% 0.22% 0.01% -2.32% -0.17% -2.07%
Avg -0.04% 0.19% -0.29% -0.76% -0.03% -0.93%
 
1992-4 1.06% -2.46% -1.36% 2.28% -0.43% -0.91%
1996-4 0.86% 1.31% -0.36% 1.37% 0.21% 3.40%
2000-4 -5.81% -3.16% -7.06% -2.46% -9.67% -28.16%
2004-4 0.61% -1.71% -0.26% -1.12% -0.32% -2.80%
2008-4 -0.26% -0.68% -1.13% 1.27% -2.61% -3.41%
Avg -0.71% -1.34% -2.03% 0.27% -2.56% -6.38%
 
OTC summary for Presidential Year 4 1964 - 2008
Avg -0.14% -0.35% -0.98% -0.08% -1.12% -2.67%
Win% 58% 58% 25% 50% 42% 42%
 
OTC summary for all years 1963 - 2011
Avg 0.01% -0.08% -0.08% 0.22% -0.26% -0.20%
Win% 61% 53% 55% 57% 55% 61%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.49% -1.40% 0.79% -0.60% -0.15% -1.84%
1960-4 0.20% 0.59% 1.15% 0.02% -0.23% 1.73%
1964-4 0.10% -0.35% 0.01% -0.06% 0.19% -0.11%
1968-4 0.06% 0.03% 0.20% 0.28% -1.27% -0.70%
 
1972-4 -0.16% 0.28% 0.38% -0.25% -0.06% 0.20%
1976-4 1.23% -0.14% -1.11% -0.91% -0.92% -1.85%
1980-4 -0.92% -0.20% -1.06% -0.48% -0.49% -3.16%
1984-4 -0.02% 0.27% -0.56% 1.76% -0.27% 1.19%
1988-4 0.27% 0.45% 0.07% -4.35% 0.01% -3.55%
Avg 0.08% 0.13% -0.46% -0.85% -0.35% -1.43%
 
1992-4 1.01% -1.86% -0.89% 1.56% 0.91% 0.72%
1996-4 0.91% 0.39% -0.53% 0.31% 0.23% 1.31%
2000-4 -0.78% -0.26% -2.23% -1.82% -5.78% -10.87%
2004-4 0.52% -1.38% -0.11% 0.06% 0.51% -0.40%
2008-4 0.16% -0.51% -0.81% 0.45% -2.04% -2.75%
Avg 0.36% -0.72% -0.91% 0.11% -1.23% -2.40%
 
SPX summary for Presidential Year 4 1956 - 2008
Avg 0.15% -0.29% -0.34% -0.29% -0.67% -1.43%
Win% 64% 43% 43% 50% 36% 36%
 
SPX summary for all years 1953 - 2011
Avg 0.16% 0.07% 0.04% 0.01% -0.08% 0.19%
Win% 62% 54% 56% 54% 53% 56%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth increased a little last week, but the 50 day ROC fell sharply.

M2


Conclusion

All of the technical indicators deteriorated last week and seasonally next week has been weak.

I expect the major averages to be lower on Thursday April 13 than they were on Thursday April 5.

Last weeks positive forecast was a miss.

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/.

In his latest newsletter, Jerry Minton looks at what it takes to be #1 over the long-term. You can get his bi-weekly letter for free by subscribing at the home page at www.alphaim.net.

Good Luck,

YTD W 3 /L6 /T 5

 


 

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.

Copyright © 2003-2014 Mike Burk

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/