Technical Market Report for April 26, 2014

By: Mike Burk | Sat, Apr 26, 2014
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The good news is:
• In spite of a down week, new lows remained minimal on the NYSE.


The negatives

Early last week the blue chips rallied to within less than 1% of their all time highs while the secondaries came up short and then underperformed in the subsequent fall.

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 barely moved when the OTC rallied for 6 consecutive days ending last Tuesday. OTC NH is at its lowest level in over a year.

OTC NH Chart

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

NY NH held up a little better, but remains much closer to its low while the SPX is still very near its all time high.

NY NH Chart


The positives

Breadth on the NYSE has held up remarkably well.

The chart below covers the past 6 months showing the SPX, in red, and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue. Dashed horizontal lines have been drawn at 10% increments for the indicator, the line is solid at the neutral 50% level.

NY HL Ratio rallied to an extremely strong 90% before easing to finish the week at a still strong 82%.

NY HL Ratio Chart

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

OTC HL Ratio rallied to above the neutral line and finished the week at a modestly positive 53%.

OTC HL Ratio Chart


Seasonality

Next week includes the last 3 trading days of April and the first 2 trading days of May during the 2nd year of the Presidential Cycle.

The tables below show the daily percentage return for the last 3 trading days of April and the first 2 trading days of May 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.

Average returns for the coming week have been positive over all years, but negative for the 2nd year of the Presidential Cycle.

Report for the last 3 days of April and the first 2 days of May.
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
  Day3 Day2 Day1 Day1 Day2 Totals
1966-2 0.03% 3 -0.81% 4 -0.07% 5 0.51% 1 -0.11% 2 -0.45%
1970-2 -2.01% 2 -2.66% 3 1.59% 4 -0.29% 5 0.05% 1 -3.32%
 
1974-2 0.23% 5 0.26% 1 0.46% 2 0.89% 3 0.39% 4 2.22%
1978-2 0.37% 3 -0.10% 4 0.51% 5 0.68% 1 0.14% 2 1.60%
1982-2 0.09% 3 -0.40% 4 0.30% 5 0.15% 1 0.53% 2 0.67%
1986-2 -0.23% 1 -0.57% 2 -1.53% 3 -0.41% 4 0.40% 5 -2.35%
1990-2 0.12% 4 -0.73% 5 0.50% 1 0.42% 2 0.41% 3 0.72%
Avg 0.12% -0.31% 0.05% 0.34% 0.37% 0.57%
 
1994-2 0.47% 2 -0.34% 4 0.29% 5 0.93% 1 -0.18% 2 1.17%
1998-2 0.63% 2 1.08% 3 0.91% 4 0.27% 5 0.20% 1 3.09%
2002-2 -2.91% 5 -0.42% 1 1.89% 2 -0.63% 3 -1.95% 4 -4.02%
2006-2 0.14% 3 0.49% 4 -0.95% 5 -0.77% 1 0.22% 2 -0.87%
2010-2 0.01% 3 1.63% 4 -2.02% 5 1.53% 1 -2.98% 2 -1.84%
Avg -0.33% 0.49% 0.02% 0.27% -0.94% -0.49%
 
OTC summary for Presidential Year 2 1966 - 2010
Averages -0.25% -0.22% 0.16% 0.27% -0.24% -0.28%
% Winners 75% 33% 67% 67% 67% 50%
MDD 4/29/1970 4.61% -- 5/2/2002 4.02% -- 5/4/2010 3.49%
 
OTC summary for all years 1963 - 2013
Averages 0.00% 0.21% 0.23% 0.30% 0.18% 0.92%
% Winners 71% 67% 67% 62% 71% 67%
MDD 4/30/2004 5.53% -- 4/29/1970 4.61% -- 5/4/1999 4.51%
 
SPX Presidential Year 2
  Day3 Day2 Day1 Day1 Day2 Totals
1930-2 -2.40% 1 -0.12% 2 0.69% 3 -2.41% 4 -3.00% 5 -7.25%
 
1934-2 0.09% 5 -0.83% 6 -2.33% 1 0.00% 2 -2.01% 3 -5.08%
1938-2 -3.08% 4 0.10% 5 -0.82% 6 -1.13% 1 2.71% 2 -2.21%
1942-2 -0.93% 2 1.87% 3 0.66% 4 0.65% 5 0.52% 6 2.77%
1946-2 0.86% 6 -0.11% 1 0.21% 2 -0.27% 3 -0.48% 4 0.22%
1950-2 0.56% 4 0.56% 5 0.61% 6 0.83% 1 -0.60% 2 1.96%
Avg -0.50% 0.32% -0.33% 0.02% 0.03% -0.47%
 
1954-2 0.00% 3 1.51% 4 0.28% 5 -0.18% 1 0.25% 2 1.87%
1958-2 -0.32% 1 -0.51% 2 1.02% 3 0.23% 4 0.34% 5 0.77%
1962-2 -0.97% 4 -1.12% 5 -1.60% 1 0.71% 2 0.44% 3 -2.55%
1966-2 -0.25% 3 -0.69% 4 -0.08% 5 -0.18% 1 -1.16% 2 -2.34%
1970-2 -1.46% 2 1.92% 3 -0.35% 4 -0.10% 5 -2.54% 1 -2.54%
Avg -0.60% 0.22% -0.14% 0.10% -0.53% -0.96%
 
1974-2 0.68% 5 -0.20% 1 0.34% 2 2.11% 3 -0.14% 4 2.80%
1978-2 0.19% 3 -0.99% 4 1.01% 5 0.87% 1 -0.43% 2 0.64%
1982-2 -0.63% 3 -0.96% 4 0.27% 5 0.32% 1 0.56% 2 -0.45%
1986-2 0.33% 1 -1.06% 2 -2.07% 3 -0.15% 4 -0.16% 5 -3.12%
1990-2 0.27% 4 -1.14% 5 0.51% 1 0.44% 2 0.67% 3 0.75%
Avg 0.17% -0.87% 0.01% 0.72% 0.10% 0.12%
 
1994-2 -0.19% 2 -0.61% 4 0.40% 5 0.47% 1 0.00% 2 0.07%
1998-2 -0.13% 2 0.88% 3 1.57% 4 0.83% 5 0.10% 1 3.24%
2002-2 -1.39% 5 -1.01% 1 1.08% 2 0.89% 3 -0.17% 4 -0.61%
2006-2 0.28% 3 0.33% 4 0.07% 5 -0.41% 1 0.61% 2 0.88%
2010-2 0.65% 3 1.29% 4 -1.66% 5 1.31% 1 -2.38% 2 -0.80%
Avg -0.16% 0.18% 0.29% 0.62% -0.37% 0.56%
 
SPX summary for Presidential Year 2 1930 - 2010
Averages -0.37% -0.04% -0.01% 0.23% -0.33% -0.52%
% Winners 43% 38% 67% 57% 48% 52%
MDD 5/2/1930 7.10% -- 5/2/1934 5.09% -- 5/2/1938 4.86%
 
SPX summary for all years 1928 - 2013
Averages -0.10% -0.01% 0.26% 0.10% 0.18% 0.41%
% Winners 51% 51% 59% 55% 69% 66%
MDD 5/3/1932 9.73% -- 5/2/1930 7.10% -- 5/2/1934 5.09%


May

Since 1963, over all years, the OTC in May has been up 59% of the time with an average gain of 0.5%. During the 2nd year of the Presidential Cycle the OTC in May has been up 33% of the time with an average loss of 2.7% (helped by a 13.0% loss in 1970). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

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 May over all years since 1963, while the green line shows the average during the 2nd year of the Presidential Cycle over the same period.

OTC in May over all years since 1963

Since 1928 the SPX has been up 56% of the time in May with an average loss of 0.2%. During the 2nd year of the Presidential Cycle the SPX has been up 43% of the time with an average loss of 1.1%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

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

SPX May 1928-2014

Since 1979 the Russell 2000 (R2K) has been up 63% of the time in May with an average gain of 1.3%. During the 2nd year of the Presidential Cycle the R2K has been up 25% of the time with an average loss of 2.2%. The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)

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

R2K May 1979-2014

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 50% of the time in May with an average loss of -0.2%. During the 2nd year of the Presidential Cycle the DJIA has been up 53% of the time in May with an average gain of 0.4%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

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

DJIA May 1885-2014


Conclusion

The NYSE breadth indicators are still strong so we may see a little end of month - beginning of month rally next week, but otherwise the market is following the average for the 2nd year of the Presidential Cycle quite closely so I expect the next several months to be down.

I expect the major averages to be lower on Friday May 2 than they were on Friday April 25.

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Good Luck,

YTD W 6/L 5/T 6

 


 

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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