Technical Market Report for March 8, 2014

By: Mike Burk | Sat, Mar 8, 2014
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The good news is:
• Most of the major averages closed at all time or multi year highs during the past week.


The negatives

New highs have been picking up, but there have been fewer of them than at recent highs, indicating narrowing leadership.

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 month, 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 lower highs since last October.

SPX versus NYSE NH Chart


The positives

New lows were in single digits most of 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 94.4% last week, its highest level in the past 6 months.

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 rose to 95.3%.

SPX versus NYSE HL Ratio Chart


Seasonality

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

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

OTC data covers the period from 1963 - 2013 while SPX data runs from 1953 - 2013. There are summaries for both the 2nd 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.

Returns for the coming week have been positive by all measures.

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

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.72% -1.43% -1.03% 0.57% -0.39% -3.00%
1970-2 -0.22% -0.50% -0.02% -0.35% -0.93% -2.02%
 
1974-2 -0.27% 0.97% 0.43% -0.62% 0.68% 1.19%
1978-2 -0.21% 0.28% 0.38% 0.40% 0.58% 1.44%
1982-2 -1.69% -0.77% 0.42% -0.19% -1.09% -3.33%
1986-2 0.47% 0.94% 0.63% 0.18% 0.40% 2.62%
1990-2 -0.20% 0.51% 0.03% 0.93% 0.06% 1.33%
Avg -0.38% 0.38% 0.38% 0.14% 0.13% 0.65%
 
1994-2 0.57% -0.37% 0.12% -0.50% 0.01% -0.17%
1998-2 -1.61% 1.35% 0.47% 0.42% 0.43% 1.06%
2002-2 3.14% 0.37% 1.29% -0.46% 2.55% 6.89%
2006-2 -0.72% -0.77% -0.04% -0.78% 0.55% -1.77%
2010-2 0.25% 0.36% 0.78% 0.40% -0.03% 1.76%
Avg 0.33% 0.19% 0.52% -0.19% 0.70% 1.56%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.10% 0.08% 0.29% 0.00% 0.23% 0.50%
Win% 33% 58% 75% 50% 67% 58%
 
OTC summary for all years 1963 - 2013
Avg -0.06% 0.41% 0.02% 0.34% -0.07% 0.64%
Win% 47% 60% 61% 67% 53% 71%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.26% 0.23% 0.23% 0.45% 0.00% 0.64%
1958-2 0.33% 0.71% -0.24% 0.12% -0.31% 0.62%
1962-2 -0.21% -0.33% -0.13% 0.72% 0.33% 0.37%
1966-2 -1.34% 0.16% 0.88% 0.00% -0.12% -0.42%
1970-2 -1.04% 0.27% -0.07% -0.41% -0.53% -1.77%
Avg -0.51% 0.21% 0.14% 0.22% -0.16% -0.11%
 
1974-2 0.00% 1.87% 0.68% -1.06% 0.87% 2.36%
1978-2 -0.63% 0.53% 0.55% 0.06% 1.13% 1.63%
1982-2 -1.83% 1.39% 0.53% -0.05% -0.69% -0.64%
1986-2 0.45% 2.26% 0.37% 0.28% 1.44% 4.79%
1990-2 -0.54% 1.26% -0.29% 0.99% -0.69% 0.73%
Avg -0.64% 1.46% 0.37% 0.04% 0.41% 1.77%
 
1994-2 0.47% -0.22% 0.25% -0.68% 0.55% 0.37%
1998-2 -0.32% 1.13% 0.40% 0.13% -0.12% 1.22%
2002-2 1.95% -0.67% 1.45% -0.45% 0.58% 2.87%
2006-2 -0.70% -0.19% 0.20% -0.49% 0.73% -0.43%
2010-2 -0.02% 0.17% 0.45% 0.40% -0.02% 0.99%
Avg 0.28% 0.05% 0.55% -0.22% 0.34% 1.00%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.26% 0.57% 0.35% 0.00% 0.23% 0.89%
Win% 29% 73% 73% 57% 50% 73%
 
SPX summary for all years 1953 - 2013
Avg -0.05% 0.25% 0.06% 0.18% -0.04% 0.41%
Win% 52% 57% 56% 62% 47% 61%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth has declined a bit over the past few weeks.

M2 Money Supply versus SPX Daily Chart


Conclusion

The market has been following the average seasonal pattern pretty closely and that pattern calls for another month of new highs.

I expect the major averages to be higher on Friday March 14 than they were on Friday March 7.

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 3/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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