Technical Market Report for March 22, 2014

By: Mike Burk | Sat, Mar 22, 2014
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The good news is:
• The major indices recovered most of their losses of the previous week.


The negatives

The new high indicators continue to reveal a pattern of declining highs.

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 recovered a little last week, if the index makes a new high anytime soon it will be accompanied by another in the series of declining 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 a pattern similar to OTC NH.

NY NH Chart


The positives

The number of new lows remains minimal.

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 recovered to 87% last week. There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

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 recovered to 84%.

NY HL Ratio Chart


Seasonality

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

Good Friday messes up the Friday count so the report this week covers the last 6 trading days of March.

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 most of the time, but a few really bad years have made average returns mostly negative.

Report for the last 6 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
  Day6 Day5 Day4 Day3 Day2 Day1 Totals
1966-2 -0.03% 4 0.53% 5 0.49% 1 0.24% 2 -0.27% 3 -0.83% 4 0.13%
1970-2 -0.56% 1 0.24% 2 0.46% 3 1.66% 4 0.15% 1 -0.03% 2 1.92%
 
1974-2 0.09% 5 -0.10% 1 -0.08% 2 -1.11% 3 -1.42% 4 -0.65% 5 -3.28%
1978-2 0.22% 4 -0.09% 1 0.36% 2 0.38% 3 0.09% 4 0.02% 5 0.99%
1982-2 -0.06% 3 0.57% 4 -0.36% 5 0.17% 1 -0.05% 2 0.13% 3 0.40%
1986-2 -0.03% 5 -0.52% 1 -0.38% 2 0.36% 3 0.73% 4 0.38% 1 0.54%
1990-2 0.63% 5 0.36% 1 0.15% 2 -0.64% 3 -0.29% 4 0.03% 5 0.24%
Avg 0.17% 0.04% -0.06% -0.17% -0.19% -0.02% -0.22%
 
1994-2 -1.36% 4 -0.41% 5 -1.40% 1 -2.23% 2 -1.37% 3 -0.19% 4 -6.96%
1998-2 1.12% 2 0.63% 3 0.25% 4 -0.27% 5 -0.27% 1 0.93% 2 2.40%
2002-2 1.96% 4 -0.93% 5 -2.10% 1 0.64% 2 0.14% 3 1.02% 4 0.73%
2006-2 0.55% 5 0.12% 1 -0.48% 2 1.45% 3 0.13% 4 -0.04% 5 1.72%
2010-2 -0.68% 3 -0.06% 4 -0.10% 5 0.39% 1 0.26% 2 -0.53% 3 -0.71%
Avg 0.32% -0.13% -0.77% 0.00% -0.22% 0.24% -0.57%
 
OTC summary for Presidential Year 2 1966 - 2010
Averages 0.15% 0.03% -0.26% 0.09% -0.18% 0.02% -0.16%
% Winners 50% 50% 42% 67% 50% 50% 75%
MDD 3/31/1994 6.78% -- 3/29/1974 3.33% -- 3/25/2002 3.01%
 
OTC summary for all years 1966 - 2010
Averages 0.02% 0.13% 0.01% -0.19% -0.08% 0.15% 0.04%
% Winners 53% 55% 47% 57% 57% 64% 67%
MDD 3/27/1980 10.60% -- 3/30/2000 10.18% -- 3/29/2001 7.69%
 
SPX Presidential Year 2
  Day6 Day5 Day4 Day3 Day2 Day1 Totals
1930-2 -0.12% 2 1.53% 3 -0.20% 4 1.14% 5 0.80% 6 0.36% 1 3.50%
 
1934-2 -1.14% 6 2.88% 1 -2.71% 2 0.29% 3 1.63% 4 1.22% 6 2.17%
1938-2 -5.46% 5 -1.60% 6 0.76% 1 -5.83% 2 -1.26% 3 -1.39% 4 -14.78%
1942-2 -0.73% 3 -0.37% 4 -0.98% 5 0.00% 6 0.12% 1 -0.62% 2 -2.58%
1946-2 1.57% 1 -0.06% 2 -0.61% 3 -0.11% 4 0.61% 5 0.22% 6 1.63%
1950-2 0.28% 6 -0.85% 1 0.40% 2 -0.51% 3 -0.80% 4 -0.06% 5 -1.54%
Avg -1.09% 0.00% -0.63% -1.23% 0.06% -0.12% -3.02%
 
1954-2 -0.49% 3 -0.19% 4 0.53% 5 0.38% 1 0.11% 2 0.94% 3 1.28%
1958-2 0.38% 1 -0.33% 2 -0.33% 3 -0.31% 4 0.07% 5 -0.24% 1 -0.75%
1962-2 0.07% 5 -0.79% 1 -0.27% 2 0.49% 3 -0.04% 4 -0.66% 5 -1.21%
1966-2 0.18% 4 0.28% 5 0.09% 1 -0.39% 2 -0.55% 3 0.51% 4 0.12%
1970-2 -0.08% 1 1.14% 2 2.03% 3 0.17% 4 -0.32% 1 0.00% 2 2.94%
Avg 0.01% 0.02% 0.41% 0.07% -0.15% 0.11% 0.47%
 
1974-2 -0.07% 5 0.38% 1 0.32% 2 -1.39% 3 -1.83% 4 -0.89% 5 -3.48%
1978-2 -0.12% 4 -0.55% 1 0.71% 2 0.16% 3 -0.26% 4 -0.22% 5 -0.29%
1982-2 -0.51% 3 0.21% 4 -1.12% 5 0.32% 1 -0.03% 2 -0.28% 3 -1.40%
1986-2 -1.35% 5 0.85% 1 -0.26% 2 1.10% 3 0.70% 4 -0.03% 1 1.01%
1990-2 0.46% 5 0.12% 1 1.15% 2 0.15% 3 -0.35% 4 -0.25% 5 1.27%
Avg -0.32% 0.20% 0.16% 0.07% -0.35% -0.33% -0.58%
 
1994-2 -0.89% 4 -0.81% 5 -0.13% 1 -1.63% 2 -1.53% 3 0.05% 4 -4.95%
1998-2 0.92% 2 -0.33% 3 -0.10% 4 -0.49% 5 -0.17% 1 0.75% 2 0.57%
2002-2 0.15% 4 -0.42% 5 -1.47% 1 0.58% 2 0.53% 3 0.25% 4 -0.37%
2006-2 0.10% 5 -0.10% 1 -0.64% 2 0.75% 3 -0.20% 4 -0.42% 5 -0.52%
2010-2 -0.55% 3 -0.17% 4 0.07% 5 0.57% 1 0.00% 2 -0.33% 3 -0.40%
Avg -0.05% -0.37% -0.45% -0.05% -0.27% 0.06% -1.13%
 
SPX summary for Presidential Year 2 1930 - 2010
Averages -0.35% 0.04% -0.13% -0.22% -0.13% -0.05% -0.85%
% Winners 43% 38% 43% 57% 43% 38% 43%
MDD 3/31/1938 14.05% -- 3/30/1994 4.91% -- 3/29/1974 4.05%
 
SPX summary for all years 1928 - 2013
Averages -0.18% 0.00% -0.02% -0.05% -0.04% -0.13% -0.43%
% Winners 48% 38% 47% 53% 44% 44% 52%
MDD 3/31/1938 14.05% -- 3/31/1939 9.03% -- 3/31/1932 7.93%


Money Supply (M2)

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

M2 Money Supply versus SPX Charts


Conclusion

There has been continued deterioration in the new high indicators suggesting the seasonal pattern of a top in the next few weeks is likely to materialize.

I expect the major averages to be lower on Friday March 28 than they were on Friday March 21.

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.

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 4/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

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