Technical Market Report for August 16, 2014

By: Mike Burk | Sat, Aug 16, 2014
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The good news is:
• Last week new lows declined for the first time in over a month.


The negatives

New highs picked up last week, but remain near their recent lows of the past 2 years.

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 rose slightly last week, but remains near its lowest point of the past 2 years.

OTC NH

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

NY NH also leveled off last week near a 2 year low.

NY NH

The next chart 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 the neutral line. If it turns around in the next few days it will be establishing a pattern of sharply declining highs.

OTC HL Ratio


The positives

Last week new lows declined and new highs increased.

The chart below is similar to the previous chart except is shows the SPX in red and NY HL Ratio has been calculated from NYSE data.

NY HL Ratio recovered well into positive territory last week.

NY HL Ratio

The next chart covers the past 6 months showing the SPX in red and a 10% trend of NYSE new lows (NY NL) in blue. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved sharply upward last week, five consecutive days of moving sharply upward puts this indicator at the minimum threshold for defining a bottom.

NY NL

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

OTC NL also recovered last week, but not quite as dramatically.

OTC NL


Seasonality

Next week includes the 5 trading days prior to the 4th Friday of August 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 4th Friday of August 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 all been negative during the 2nd year of the Presidential Cycle and mixed over all years.

Report for the week before the 4th Friday of August.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.69% -2.36% 0.00% 1.36% -1.16% -2.85%
1970-2 2.41% 0.64% 0.98% -0.05% 1.15% 5.13%
 
1974-2 -1.11% 0.91% -1.22% -2.05% -1.60% -5.07%
1978-2 -0.70% 0.07% 0.64% 0.41% 0.41% 0.84%
1982-2 1.75% 1.38% 1.57% 1.85% -0.32% 6.23%
1986-2 -0.24% -0.12% 0.56% 0.06% 0.10% 0.35%
1990-2 -1.25% -2.29% -1.27% -3.90% 1.97% -6.74%
Avg -0.31% -0.01% 0.06% -0.73% 0.11% -0.88%
 
1994-2 -0.02% 0.77% 0.50% 0.41% 1.08% 2.74%
1998-2 -0.38% 0.41% -1.66% -4.63% -2.77% -9.03%
2002-2 2.46% -1.29% 2.37% 0.97% -2.97% 1.55%
2006-2 -0.75% 0.11% -0.71% 0.11% 0.15% -1.09%
2010-2 -0.92% -1.66% 0.84% -1.07% 1.65% -1.17%
Avg 0.08% -0.33% 0.27% -0.84% -0.57% -1.40%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg 0.05% -0.29% 0.24% -0.54% -0.19% -0.76%
Win% 25% 58% 64% 58% 58% 50%
 
OTC summary for all years 1963 - 2013
Avg -0.11% 0.02% 0.34% -0.16% 0.21% 0.29%
Win% 39% 55% 67% 51% 63% 59%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.67% -0.42% -0.71% -0.26% 0.29% -1.77%
Avg -0.67% -0.42% -0.71% -0.26% 0.29% -1.77%
 
1958-2 -0.59% 0.17% 0.04% 0.66% 0.21% 0.49%
1962-2 0.61% -0.42% 1.12% -0.13% -0.20% 0.97%
1966-2 -1.73% -0.17% 1.23% -1.28% -2.11% -4.06%
1970-2 2.21% 0.16% 0.11% -0.16% 0.96% 3.28%
1974-2 -1.45% 0.51% -1.92% -0.97% -1.72% -5.55%
Avg -0.19% 0.05% 0.12% -0.38% -0.57% -0.97%
 
1978-2 -0.80% 0.40% 0.58% 0.16% -0.17% 0.17%
1982-2 2.73% -0.65% 1.93% 0.82% -1.21% 3.62%
1986-2 0.09% -0.35% 1.32% -0.04% 0.21% 1.23%
1990-2 0.21% -2.02% -1.65% -3.00% 1.45% -5.02%
1994-2 -0.30% 0.48% 0.97% -0.20% 1.22% 2.17%
Avg 0.39% -0.43% 0.63% -0.45% 0.30% 0.44%
 
1998-2 0.64% 0.44% -0.80% -3.84% -1.48% -5.03%
2002-2 2.36% -1.40% 1.27% 1.41% -2.27% 1.37%
2006-2 -0.37% 0.10% -0.45% 0.24% -0.07% -0.55%
2010-2 -0.40% -1.45% 0.33% -0.77% 1.66% -0.64%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg 0.17% -0.31% 0.23% -0.49% -0.22% -0.62%
Win% 47% 47% 67% 33% 47% 53%
 
SPX summary for all years 1953 - 2013
Avg -0.15% 0.05% 0.20% -0.19% 0.04% -0.06%
Win% 41% 56% 59% 46% 51% 59%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth fell last week.

SPX and M2 Money Supply Chart


Conclusion

The market rallied last week on seasonal strength. Can it continue without seasonality in its favor?

I expect the major averages to be lower on Friday August 22 than they were on Friday August 15.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 9/L 13/T 11

 


 

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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