Technical Market Report for March 1, 2014

By: Mike Burk | Sat, Mar 1, 2014
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The good news is:
• Most of the major averages closed at all time or multi year highs on Thursday or Friday.


The negatives

The major indices were up 6% - 9% in February leaving the market overbought.

New highs have picked up quite nicely, however, they are running below levels of previous highs of the last 6 months.

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

OTC NH has been rising sharply for the past 3 weeks, but remains well below its earlier levels when the index was hitting new highs.

OTC versus OTC NH Chart

The next chart is similar to the one above except is shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated from NYSE data.

NY NH has also had progressively declining highs since last October.

SPX versus NYSE NH Chart


The positives

There were 3 new lows on the NASDAQ last Thursday, that is about as low a number as you will ever see.

The markets rise in February was broad based. The Russell 2000, S&P Mid Cap and S&P 500 all closed at all time highs last week.

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 for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio rose a bit to 93.5% last week.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

OTC versus OTC HL ratio Chart

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

NY HL Ratio held above 90%.

SPX versus NYSE HL Ratio Chart


Seasonality

Next week includes the first 5 trading days of March during the 2nd year of the Presidential Cycle.

The tables show the daily percentage return for the first 5 trading days of March during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 - 2013 while SPX data runs from 1928 - 2013. There are summaries for both the 2nd year of the Presidential Cycle and all years combined.

Returns for the coming week have been positive over all periods.

Report for the first 5 days of March.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 2
  Day1 Day2 Day3 Day4 Day5 Totals
1966-2 0.22% 2 -0.54% 3 -0.50% 4 -0.23% 5 -0.72% 1 -1.78%
1970-2 0.48% 1 0.13% 2 0.47% 3 0.06% 4 -0.23% 5 0.90%
 
1974-2 -0.32% 5 -0.27% 1 0.97% 2 0.43% 3 -0.62% 4 0.20%
1978-2 0.00% 3 0.24% 4 0.24% 5 -0.21% 1 0.28% 2 0.54%
1982-2 0.39% 1 0.01% 2 -1.18% 3 -0.97% 4 -1.32% 5 -3.07%
1986-2 0.07% 1 0.34% 2 -0.32% 3 0.46% 4 0.20% 5 0.75%
1990-2 0.32% 4 0.89% 5 -0.20% 1 0.51% 2 0.03% 3 1.55%
Avg 0.09% 0.24% -0.10% 0.05% -0.28% 0.00%
 
1994-2 -0.49% 2 -0.66% 3 0.14% 4 0.76% 5 0.57% 1 0.33%
1998-2 -0.67% 1 -0.09% 2 0.15% 3 -2.72% 4 2.43% 5 -0.90%
2002-2 4.11% 5 3.14% 1 0.37% 2 1.29% 3 -0.46% 4 8.46%
2006-2 1.46% 3 -0.15% 4 -0.37% 5 -0.72% 1 -0.77% 2 -0.55%
2010-2 1.58% 1 0.32% 2 0.00% 3 0.51% 4 1.48% 5 3.89%
Avg 1.20% 0.51% 0.06% -0.18% 0.65% 2.24%
 
OTC summary for Presidential Year 2 1966 - 2010
Averages 0.60% 0.28% -0.02% -0.07% 0.07% 0.86%
% Winners 67% 58% 50% 58% 50% 67%
MDD 3/5/1982 3.43% -- 3/5/1998 3.31% -- 3/7/2006 2.00%
 
OTC summary for all years 1963 - 2013
Averages 0.19% 0.00% 0.35% -0.17% -0.02% 0.36%
% Winners 64% 51% 69% 54% 52% 61%
MDD 3/7/1980 7.49% -- 3/6/2009 6.10% -- 3/6/1968 4.86%
 
SPX Presidential Year 2
  Day1 Day2 Day3 Day4 Day5 Totals
1930-2 0.73% 6 -0.38% 1 0.77% 2 -0.76% 3 0.98% 4 1.34%
 
1934-2 -0.37% 4 3.26% 5 0.00% 6 -0.54% 1 -1.18% 2 1.17%
1938-2 1.06% 2 -0.96% 3 -0.97% 4 -0.98% 5 -0.09% 6 -1.94%
1942-2 -1.40% 1 1.53% 2 -1.05% 3 -1.53% 4 -2.63% 5 -5.06%
1946-2 -0.41% 5 -0.64% 6 -0.06% 1 1.05% 2 -0.46% 3 -0.51%
1950-2 0.12% 3 -0.06% 4 0.35% 5 0.23% 6 -0.06% 1 0.58%
Avg -0.20% 0.63% -0.35% -0.35% -0.88% -1.15%
 
1954-2 0.38% 1 0.27% 2 0.00% 3 0.34% 4 0.42% 5 1.41%
1958-2 0.71% 1 0.53% 2 0.29% 3 1.28% 4 0.17% 5 2.98%
1962-2 0.34% 4 -0.06% 5 -0.21% 1 -0.33% 2 -0.13% 3 -0.39%
1966-2 -1.27% 2 -1.01% 3 0.36% 4 -0.26% 5 -1.34% 1 -3.52%
1970-2 0.23% 1 0.58% 2 -0.21% 3 -0.04% 4 -0.62% 5 -0.06%
Avg 0.08% 0.06% 0.04% 0.20% -0.30% 0.08%
 
1974-2 -0.72% 5 0.00% 1 1.87% 2 0.68% 3 -1.06% 4 0.77%
1978-2 0.17% 3 0.15% 4 0.15% 5 -0.63% 1 0.53% 2 0.37%
1982-2 0.18% 1 -0.56% 2 -1.56% 3 -0.94% 4 -0.49% 5 -3.37%
1986-2 -0.66% 1 -0.46% 2 -0.02% 3 0.35% 4 0.20% 5 -0.59%
1990-2 0.26% 4 0.84% 5 -0.54% 1 1.26% 2 -0.29% 3 1.53%
Avg -0.15% -0.01% -0.02% 0.14% -0.22% -0.26%
 
1994-2 -0.58% 2 0.08% 3 -0.39% 4 0.37% 5 0.47% 1 -0.05%
1998-2 -0.15% 1 0.41% 2 -0.45% 3 -1.17% 4 2.00% 5 0.64%
2002-2 2.26% 5 1.95% 1 -0.67% 2 1.45% 3 -0.45% 4 4.55%
2006-2 0.83% 3 -0.16% 4 -0.15% 5 -0.70% 1 -0.19% 2 -0.37%
2010-2 1.02% 1 0.23% 2 0.04% 3 0.37% 4 1.40% 5 3.07%
Avg 0.67% 0.50% -0.32% 0.07% 0.65% 1.57%
 
SPX summary for Presidential Year 2 1930 - 2013
Averages 0.13% 0.26% -0.12% -0.02% -0.13% 0.12%
% Winners 62% 52% 33% 48% 38% 52%
MDD 3/6/1942 5.12% -- 3/5/1982 3.50% -- 3/7/1966 3.49%
 
SPX summary for all years 1928 - 2013
Averages 0.16% 0.16% 0.24% 0.10% 0.02% 0.65%
% Winners 64% 55% 64% 52% 52% 62%
MDD 3/5/2009 7.15% -- 3/7/1980 5.95% -- 3/6/1942 5.12%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth has been following its trend pretty closely.

SPX versus M2 Money Supply Chart


March

Since 1963, over all years, the OTC in March has been up 65% of the time with an average gain of 0.9%. During the 2nd year of the Presidential Cycle March has been up 58% time with an average gain of 1.4%. The best March ever for the OTC was 2009 (+10.9%), the worst 1980 (-17.1%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in March over all years since 1963 in blue, while the green line shows the average during the 2nd year of the Presidential Cycle over the same period.

OTC March 1963-2014 Chart

Since 1928 the SPX has been up 62% of the time in March with an average gain of 0.6%. During the 2nd year of the Presidential Cycle the SPX has been up 67% of the time with an average gain of 0.6%. The best March for the SPX was 1928 (+10.8%) the worst 1938 (-25.0%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in March in red and the average daily performance during the 2nd year of the Presidential Cycle, over the same period, in green.

SPX March 1928-2014 Chart

Since 1979 the Russell 2000 (R2K) has been up 74% of the time in March with an average gain of 1.4%. During the 2nd year of the Presidential Cycle the R2K has been up 75% of the time with an average gain of 3.3%. The best March ever for the R2K 1979 (+9.7%), the worst 1980 (-18.5%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in March in magenta and the average daily performance during the 2nd year of the Presidential Cycle in green.

Russell2000 March 1979-2014 Chart

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 60% of the time in March with an average gain of 0.7%. During the 2nd year of the Presidential Cycle the DJIA has been up 59% of the time in March with an average gain of 0.2%. The best March for the DJIA 1920 (+12.6%), the worst 1938 (-23.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in March in black and the average performance during the 2nd year of the Presidential Cycle in green.

DJIA March 1885-2014 Chart


Conclusion

The secondaries have been outperforming the blue chips and the breadth indicators have been strong. The market looks good.

I expect the major averages to be higher on Friday March 7 than they were on Friday February 28.

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

Good Luck,

YTD W 2/L 3/T 4

 


 

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