Technical Market Report for January 19, 2013

By: Mike Burk | Sat, Jan 19, 2013
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The good news is:
• Most of the major indices closed at or very near multi year highs again last Friday.


The negatives

The market has been up for 3 consecutive weeks so it is a little overbought, other than that, and a little weakness in volume, everything you want to see in a bull market is there: New highs, strong breadth and the secondaries leading the blue chips.


The positives

Breadth by any measure but volume has been strong and the secondaries are outperforming the blue chips.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs / (new highs + new lows) (OTC HL Ratio) in red. Dashed vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the neutral 50% level.

OTC HL Ratio finished the week at 94%, its highest level since early 2011. There are trading systems that impose a no sell filter when variations of this indicator are above 80%.

OTC HL Ratio Chart

The chart below is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio finished the week at an extremely strong 98%.

NY HL Ratio Chart


Seasonality

Next week includes the 4 trading days prior to the 4th Friday in January during the 1st year of the Presidential Cycle.

The tables below 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. The market will be closed Monday in observance of the Martin Luther King holiday which is a little late this year.

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

Average returns have been modestly positive by all measures.

Report for the week before the 4th Friday of January.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

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%
1989-1 -0.43% 0.51% 0.52% 0.78% 0.22% 1.60%
Avg 0.12% -0.20% -0.20% 0.10% 0.13% -0.07%
 
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%
2009-1 0.00% -5.78% 4.60% -2.76% 0.81% -3.14%
Avg 0.04% -0.25% 1.21% -1.51% 0.08% -0.43%
 
OTC summary for Presidential Year 1 1965 - 2009
Avg 0.15% -0.14% 0.46% -0.58% 0.15% 0.07%
Win% 64% 67% 58% 45% 67% 58%
 
OTC summary for all years 1963 - 2012
Avg -0.15% -0.11% 0.28% 0.08% 0.00% 0.11%
Win% 54% 47% 56% 48% 67% 57%
 
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%
Avg -0.04% 0.22% 0.28% 0.27% 0.08% 0.80%
 
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%
1989-1 -0.74% 1.40% 0.23% 0.88% 0.73% 2.50%
Avg 0.14% -0.12% -0.20% -0.21% 0.19% -0.15%
 
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%
2009-1 0.00% -5.28% 4.35% -1.52% 0.54% -1.91%
Avg 0.16% -0.56% 1.03% -0.59% -0.16% -0.16%
 
SPX summary for Presidential Year 1 1953 - 2009
Avg 0.08% -0.15% 0.37% -0.17% 0.04% 0.17%
Win% 43% 67% 67% 57% 47% 67%
 
SPX summary for all years 1959 - 2012
Avg -0.10% 0.00% 0.21% 0.13% 0.00% 0.24%
Win% 52% 58% 57% 58% 54% 65%


Conclusion

The market is overbought, but the breadth indicators are strong and seasonality is modestly positive.

I expect the major averages to be higher on Friday January 25 than they were on Friday January 18.

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.

Good Luck,

YTD W 3/L 0/T 0

 


 

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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