Technical Market Report for August 30, 2014

By: Mike Burk | Sat, Aug 30, 2014
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The good news is:
• The NASDAQ composite (OTC) closed at a multi year high and the S&P 500 (SPX) closed at an all time high on Friday.


The negatives

New highs leveled off on the NASDAQ last week, but increased on the NYSE.

The chart below covers the past 6 months showing the 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 the month.

OTC NH leveled off last week.

OTC NH

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

NY NH continued climbing last week, but remains well below its high of 2 months ago.

NY NH

Advance Decline Lines (ADL) are a running total of declining issues subtracted from advancing issues. Their behavior varies and changes. There is often a bias shift from positive to negative near cyclical tops.

The chart below covers the past 6 months showing the OTC in blue and an ADL calculated from NASDAQ data in green. There has been a negative bias in the ADL for the past 6 months that appears to be accelerating.

OTC ADL calculated from NASDAQ


The positives

Last week new lows as well as downside volume continued declining.

The chart below covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs / (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 finished the week at an extremely strong 94%.

NY HL Ratio

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

OTC HL Ratio finished the week at a very strong 72%.

OTC HL Ratio


Seasonality

Next week includes the first 4 trading days of September 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 first 4 trading days of September during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2013 while SPX data runs from 1928 through 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 by all measures.

Report for the first 4 days of September.
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
  Day1 Day2 Day3 Day4 Totals
1966-2 1.44% 4 -0.23% 5 -0.12% 2 -0.40% 3 0.69%
1970-2 0.00% 2 -0.80% 3 0.05% 4 0.98% 5 0.23%
 
1974-2 -2.39% 2 -3.17% 3 2.15% 4 0.80% 5 -2.61%
1978-2 0.25% 5 0.82% 2 0.23% 3 0.23% 4 1.53%
1982-2 -0.23% 3 1.24% 4 1.42% 5 -0.64% 2 1.79%
1986-2 -0.71% 2 -0.33% 3 0.57% 4 -0.70% 5 -1.18%
1990-2 0.12% 2 0.20% 3 -0.96% 4 0.42% 5 -0.21%
Avg -0.59% -0.25% 0.68% 0.02% -0.13%
 
1994-2 -0.87% 4 0.04% 5 0.03% 2 0.63% 3 -0.17%
1998-2 5.06% 2 1.12% 3 -1.31% 4 -0.34% 5 4.53%
2002-2 -3.88% 2 2.25% 3 -3.20% 4 3.54% 5 -1.28%
2006-2 0.43% 5 0.57% 2 -1.72% 3 -0.58% 4 -1.29%
2010-2 2.97% 3 1.06% 4 1.53% 5 -1.11% 2 4.46%
Avg 0.74% 1.01% -0.93% 0.43% 1.25%
 
OTC summary for Presidential Year 2 1966 - 2010
Averages 0.18% 0.23% -0.11% 0.23% 0.54%
% Winners 50% 67% 58% 50% 50%
MDD 9/4/1974 5.48% -- 9/5/2002 4.86% -- 9/7/2006 2.29%
 
OTC summary for all years 1963 - 2013
Averages 0.07% 0.07% 0.00% 0.21% 0.35%
% Winners 60% 63% 61% 61% 57%
MDD 9/7/2001 6.52% -- 9/4/1974 5.48% -- 9/6/2000 5.22%
 
SPX Presidential Year 2
  Day1 Day2 Day3 Day4 Totals
1930-2 0.05% 2 -0.98% 3 -0.71% 4 1.52% 5 -0.12%
 
1934-2 -0.22% 6 -0.77% 2 1.66% 3 -2.06% 4 -1.39%
1938-2 -1.16% 4 2.85% 5 0.73% 6 -1.05% 2 1.37%
1942-2 0.00% 2 0.12% 3 -0.12% 4 -0.12% 5 -0.12%
1946-2 -6.73% 2 -0.45% 3 3.43% 4 -0.94% 5 -4.69%
1950-2 0.71% 5 0.70% 2 -0.75% 3 0.27% 4 0.93%
Avg -1.48% 0.49% 0.99% -0.78% -0.78%
 
1954-2 0.70% 3 0.77% 4 0.76% 5 0.52% 2 2.75%
1958-2 0.52% 2 0.38% 3 -0.17% 4 -0.27% 5 0.46%
1962-2 -0.95% 2 -0.75% 3 0.41% 4 0.03% 5 -1.25%
1966-2 0.78% 4 -0.36% 5 -0.59% 2 -0.81% 3 -0.98%
1970-2 -0.70% 2 0.01% 3 1.40% 4 0.90% 5 1.61%
Avg 0.07% 0.01% 0.36% 0.08% 0.52%
 
1974-2 -2.26% 2 -2.60% 3 3.17% 4 0.78% 5 -0.90%
1978-2 0.38% 5 0.78% 2 0.85% 3 0.04% 4 2.05%
1982-2 -1.05% 3 1.72% 4 2.00% 5 -1.07% 2 1.59%
1986-2 -1.74% 2 0.63% 3 1.50% 4 -1.32% 5 -0.94%
1990-2 0.16% 2 0.40% 3 -1.21% 4 0.92% 5 0.27%
Avg -0.90% 0.19% 1.26% -0.13% 0.41%
 
1994-2 -0.49% 4 -0.46% 5 0.18% 2 -0.18% 3 -0.95%
1998-2 3.83% 2 -0.38% 3 -0.83% 4 -0.85% 5 1.77%
2002-2 -4.15% 2 1.75% 3 -1.60% 4 1.68% 5 -2.32%
2006-2 0.55% 5 0.17% 2 -0.99% 3 -0.48% 4 -0.75%
2010-2 2.95% 3 0.91% 4 1.32% 5 -1.15% 2 4.03%
Avg 0.54% 0.40% -0.38% -0.20% 0.36%
 
SPX summary for Presidential Year 2 1930 - 2010
Averages -0.42% 0.21% 0.50% -0.17% 0.12%
% Winners 48% 62% 57% 43% 48%
MDD 9/4/1946 7.15% -- 9/4/1974 4.80% -- 9/3/2002 4.15%
 
SPX summary for all years 1928 - 2013
Averages -0.04% 0.11% 0.24% -0.06% 0.26%
% Winners 65% 54% 58% 45% 57%
MDD 9/4/1946 7.15% -- 9/4/1974 4.80% -- 9/7/1933 4.72%


Money Supply (M2)

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

SPX and M2 Money Supply Chart


September

Since 1963, over all years, the OTC in September has been up 61% of the time and as been on average up 0.1% for the month. During the 2nd year of the Presidential Cycle September has been up 50% time also with an average gain of 0.1%. The best September ever for the OTC was 1998 (+13.0%), the worst 2001 (-17.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC 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 of the OTC in September over all years since 1963 while the cyan line shows the average during the 2nd year of the Presidential Cycle over the same period.

Average of the OTC in September over all years since 1963

Since 1928 the SPX has been up 46% of the time in September with an average loss of -1.0%. During the 2nd year of the Presidential Cycle the SPX has been up 48% of the time with an average loss of -1.2%. The best September ever for the SPX was 1939 +16.5% the worst 1931 -29.9%.

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in September in red and the performance during the 2nd year of the Presidential Cycle in cyan.

All years for the SPX in September

Since 1979 the Russell 2000 (R2K) has been up 57% of the time in September with an average loss of -0.3%. During the 2nd year of the Presidential Cycle the R2K has been up 50% of the time with an average gain of 0.1% (helped by a 12.3% gain in 2010). The best September ever for the R2K, 2010 +12.3%, the worst 2001 (-13.6%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in September in magenta and the performance during the 2nd year of the Presidential Cycle in cyan.

All years of the R2K in September

Since 1885 the DJIA has been up 45% of the time in September with an average loss of -0.9%. During the 2nd year of the Presidential Cycle the DJIA has been up 39% of the time in September with an average loss of -1.7%. The best September ever for the DJIA, 1939 +13.5%, the worst 1930 -30.7%.

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

All years of the DJIA in September


Conclusion

The market has been climbing all summer in spite of seasonal weakness and Fed tapering. Seasonally next week has been strong.

I expect the major averages to be higher on Friday September 5 than they were on Friday August 29.

Last weeks negative 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.stockmarket-ta.com/signup.html. If it is not for you, reply with REMOVE in the subject line.

These reports are archived at: http://www.safehaven.com/

Jim Miekka, editor of the Sudbury Bull and Bear Report and developer of the Hindenburg Omen was killed August 19 when he was hit by a motorist while out for a walk with his guide dog, he was blind. We corresponded for the past 20 years, I miss him. You can read more at: http://blogs.wsj.com/moneybeat/2014/08/21/jim-miekka-creator-of-hindenburg-omen-dies-in-accident/

Good Luck,

YTD W 9/L 15/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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