Technical Market Report for March 15, 2014

By: Mike Burk | Sat, Mar 15, 2014
Print Email

The good news is:
• In spite of a rough week for the major averages, new lows increased only modestly.


The negatives

The number of new highs declined sharply last week.

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 fell last week adding to its pattern of progressively lower highs.

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 has a pattern of progressively lower highs over the past 5 months.

NY NH Chart


The positives

New highs outnumbered new lows every day 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 fell last week, but remains strong at 78%.

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 fell from 95% to 65% last week.

NY HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd 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 3rd 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 strongest during the 2nd year of the Presidential Cycle. The SPX has not been down during the coming week since 1986.

Report for the week before the 3rd Friday of March.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.19% -0.92% -0.63% 0.23% 0.28% -1.22%
1970-2 -2.13% -0.76% 1.04% 0.17% 0.06% -1.62%
 
1974-2 0.74% -0.07% 0.55% 0.19% 0.02% 1.42%
1978-2 0.11% 0.13% 0.14% 0.56% 0.54% 1.46%
1982-2 -0.18% 0.21% -0.05% 1.15% 0.96% 2.09%
1986-2 -0.47% 0.38% 0.05% 0.27% -0.03% 0.21%
1990-2 -0.05% -0.45% 0.36% 0.44% 0.94% 1.24%
Avg 0.03% 0.04% 0.21% 0.52% 0.48% 1.28%
 
1994-2 0.46% 0.09% 0.69% 0.61% 0.01% 1.85%
1998-2 0.93% -0.50% 0.51% 0.65% -0.60% 0.99%
2002-2 -0.01% -1.68% -1.85% -0.42% 0.76% -3.20%
2006-2 0.22% 1.27% 0.69% -0.53% 0.30% 1.96%
2010-2 -0.23% 0.67% 0.47% 0.09% -0.71% 0.29%
Avg 0.27% -0.03% 0.10% 0.08% -0.05% 0.38%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.07% -0.13% 0.16% 0.28% 0.21% 0.46%
Win% 42% 50% 75% 83% 75% 75%
 
OTC summary for all years 1963 - 2013
Avg -0.19% 0.07% 0.00% 0.18% -0.10% -0.04%
Win% 49% 55% 65% 73% 49% 57%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.45% -0.04% 0.23% 0.41% 0.30% 0.45%
1958-2 -0.69% -0.36% 0.48% 0.05% 0.74% 0.22%
1962-2 -0.03% 0.28% 0.44% 0.21% -0.17% 0.74%
1966-2 -1.13% -0.57% 0.58% 0.35% 0.41% -0.35%
1970-2 -1.08% 0.44% 0.29% -0.14% -0.41% -0.91%
Avg -0.67% -0.05% 0.40% 0.18% 0.17% 0.03%
 
1974-2 1.12% 0.27% 0.60% -0.09% -0.37% 1.53%
1978-2 0.08% 0.45% -0.26% 0.44% 0.77% 1.48%
1982-2 0.77% -0.16% -0.18% 1.12% 0.28% 1.83%
1986-2 -0.79% 0.47% -0.08% 0.40% -1.35% -1.35%
1990-2 0.22% -0.79% 0.26% 0.36% 1.14% 1.18%
Avg 0.28% 0.05% 0.07% 0.44% 0.09% 0.94%
 
1994-2 0.20% -0.08% 0.52% 0.32% 0.03% 0.99%
1998-2 1.00% 0.11% 0.46% 0.39% 0.87% 2.83%
2002-2 0.34% -0.23% -0.99% -0.09% 1.14% 0.17%
2006-2 0.20% 1.04% 0.43% 0.18% 0.15% 1.99%
2010-2 0.05% 0.78% 0.58% -0.03% -0.51% 0.86%
Avg 0.36% 0.32% 0.20% 0.15% 0.34% 1.37%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.01% 0.11% 0.22% 0.26% 0.20% 0.78%
Win% 60% 53% 73% 73% 67% 80%
 
SPX summary for all years 1953 - 2013
Avg 0.01% 0.21% 0.13% 0.21% 0.00% 0.56%
Win% 63% 57% 59% 59% 57% 62%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth continued its decline last week.

SPX versus M2 Money Supply Chart


Conclusion

Some comfort can be taken from the low number of new lows, but there is no evidence the recent decline has ended. The seasonal pattern calls for a top around mid April.

I expect the major averages to be higher on Friday March 21 than they were on Friday March 14.

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://www.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://stockmarket-ta.com/.

In his latest news letter, Jerry Minton discusses risk management. You can sign up for his free letter at: http://www.alphaim.net/index.html.

Good Luck,

YTD W 3/L 4/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

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

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