Technical Market Report for June 14, 2014

By: Mike Burk | Sat, Jun 14, 2014
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The good news is:
• All of the major indices were down last week, but the secondaries held up better than the blue chips and there was no significant build up of new lows.


The negatives

New highs declined sharply last week, falling from 315 Monday to 104 Friday on the NYSE and 192 Monday to 61 Friday on the NASDAQ.

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.

The OTC NH low of a month ago was its lowest level in the past 2 years.

OTC NH

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

NY NH was strong in the recent rally, rising to just a little under its high of the past 6 months.

These 2 charts illustrate the dichotomy in strength between the NASDAQ and NYSE.

NY NH

AD lines are a running total of declining issues subtracted from advancing issues. For various reasons they change in character over time, but sudden changes can be revealing.

The chart below covers the past 6 months showing the OTC in blue and an AD line calculated from NASDAQ data (OTC ADL) in green.

In January the OTC ADL was leading the OTC upward and peaked with the index in early February. In the past month the OTC ADL has been lagging the index, indicating a narrowing of leadership in this recent rally.

OTC ADL


The positives

In spite of a down week for the indices, there was no build up of new lows.

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

NY HL Ratio fell a little last week, but is still at a very high 91%.

NY HL Ratio

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 rose above 80% last week and finished the week at a very strong 79.5%.

OTC HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of June during the 2nd year of the Presidential Cycle.

The tables below show the change, on a percentage basis, of the OTC and SPX for the 5 trading days prior to the 3rd Friday of June during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2013 while SPX data runs from 1953 through 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.

Average returns for the coming week have been modestly negative by all measures.

Report for the week before the 3rd Friday of June.
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 0.51% 0.31% 0.20% -0.02% 0.24% 1.24%
1970-2 -1.41% 0.27% 1.66% 0.83% 1.46% 2.80%
 
1974-2 -1.47% -0.36% -0.73% -1.00% -0.93% -4.49%
1978-2 -0.10% -0.04% 0.22% -0.26% -0.40% -0.58%
1982-2 -0.81% -0.56% 0.15% -0.93% -0.79% -2.94%
1986-2 -0.26% -0.57% -0.26% 0.29% 0.12% -0.68%
1990-2 0.42% 0.81% 0.49% -0.38% 0.10% 1.45%
Avg -0.44% -0.14% -0.03% -0.45% -0.38% -1.45%
 
1994-2 -0.35% 0.58% -0.02% -0.12% -0.76% -0.66%
1998-2 -1.68% 2.17% 1.33% -0.21% 0.49% 2.10%
2002-2 3.23% -0.67% -2.99% -2.14% -1.62% -4.20%
2006-2 -2.05% -0.90% 0.65% 2.79% -0.66% -0.17%
2010-2 0.02% 2.76% 0.00% 0.05% 0.11% 2.95%
Avg -0.17% 0.79% -0.20% 0.07% -0.49% 0.00%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.33% 0.32% 0.06% -0.09% -0.22% -0.27%
Win% 33% 50% 67% 33% 50% 42%
 
OTC summary for all years 1963 - 2013
Avg -0.18% 0.12% 0.00% -0.07% 0.02% -0.11%
Win% 43% 59% 62% 46% 58% 51%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.14% 0.73% 0.73% -0.28% 0.28% 1.60%
1958-2 0.36% -0.53% 0.89% -1.61% 0.54% -0.36%
1962-2 -1.08% -2.56% -1.49% -2.11% 2.87% -4.37%
1966-2 0.45% 0.28% -0.39% -0.30% 0.05% 0.08%
1970-2 0.23% 2.38% -0.20% 0.67% 0.71% 3.79%
Avg 0.02% 0.06% -0.09% -0.72% 0.89% 0.15%
 
1974-2 -1.38% -0.66% -0.68% -0.71% -0.85% -4.28%
1978-2 -0.38% 0.02% -0.09% -1.15% -0.94% -2.53%
1982-2 -1.15% -0.25% -0.75% -1.17% -0.30% -3.61%
1986-2 0.16% -0.72% 0.26% -0.38% 1.44% 0.76%
1990-2 0.81% 1.28% -0.37% -0.55% 0.00% 1.18%
Avg -0.39% -0.07% -0.33% -0.79% -0.13% -1.69%
 
1994-2 0.09% 0.71% -0.38% 0.29% -0.75% -0.04%
1998-2 -1.98% 0.98% 1.79% -0.06% -0.52% 0.21%
2002-2 2.87% 0.09% -1.65% -1.34% -1.70% -1.74%
2006-2 -1.27% -1.03% 0.52% 2.12% -0.37% -0.02%
2010-2 -0.18% 2.35% -0.06% 0.13% 0.13% 2.37%
Avg -0.09% 0.62% 0.04% 0.23% -0.64% 0.16%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.15% 0.21% -0.12% -0.43% 0.04% -0.46%
Win% 53% 60% 33% 27% 53% 47%
 
SPX summary for all years 1953 - 2013
Avg -0.07% 0.15% -0.02% -0.17% 0.00% -0.10%
Win% 57% 56% 47% 46% 59% 52%


Conclusion

The market lost a lot of steam last week with new highs declining dramatically. I view the rally from late May through last Monday as a spectacular end of month, beginning of month event that is over now. However, we should get another one at the end of this month.

I expect the major averages to be lower on Friday June 20 than they were on Friday June 13.

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Good Luck,

YTD W 8/L 8/T 8

 


 

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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