Technical Market Report

By: Mike Burk | Sun, Sep 11, 2005
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The good news is:
 • All of the short and intermediate term indicators are moving upward.

The NASDAQ new high indicator ( OTC NH) is a 10% trend (19 day EMA) of NASDAQ new highs. Its direction, not level is a good short term indicator. The chart below shows the NASDAQ composite (OTC) in red and OTC NH in green, dashed vertical lines are drawn on the first trading day of each month. It is reassuring to see OTC NH continued moving upward last Thursday which was a down day for the index.

Summation indices (SI) are running totals of oscillator values.

The chart below shows the OTC in red, OTC AD SI calculated from NASDAQ advancing issues - declining issues, OTC HL SI calculated from NASDAQ new highs - new lows and OTC UD SI calculated from NASDAQ upside - downside volume. When all of the SI's are headed in the same direction it is imprudent to bet against them. OTC HL SI is moving sharply upward while the other two are moving modestly upward.

The current rally is broad based, the only sector that appears to be having trouble is transportation. The chart below shows the Dow Jones Transportation average (DJT) along with SI's calculated from its component issues. For HL SI new highs and lows were calculated over the trailing 6 weeks rather than 52 weeks as reported by the exchanges.

The table below shows daily returns for the week prior to options expiration during the 1 st year of the Presidential cycle for the SPX from 1929 and OTC from 1965 with summaries for all years 1963 - 2004 for the OTC and 1928 - 2004 for the S&P500 (SPX).

Options were not an issue prior to the mid 80's and then more important to the SPX than the OTC. If options are a factor their effect has been mixed. In the past 20 years during the 1 st year of the Presidential cycle the SPX has been up 40% of the time with an average return of +1.67%. The good years have been great while the down years have been not so bad.

OTC Pres Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.51% 0.32% -0.19% 0.38% 0.70% 1.72%
1969-1 0.25% 1.42% 0.67% 0.26% 0.18% 2.79%
1973-1 0.19% 0.03% 1.51% 0.79% 0.64% 3.16%
1977-1 -0.31% -0.14% 0.15% 0.36% -0.23% -0.17%
1981-1 -0.10% -0.03% -0.92% -1.12% -0.78% -2.95%
Avg 0.11% 0.32% 0.25% 0.13% 0.10% 0.91%
 
1985-1 -0.64% -1.51% -0.01% 0.91% 0.27% -0.98%
1989-1 -0.19% 0.31% -0.01% -0.65% -0.26% -0.79%
1993-1 -0.54% -1.04% 0.94% 0.03% 0.04% -0.55%
1997-1 -0.87% 2.06% -0.13% 0.22% 0.61% 1.90%
2001-1 2.00% 0.15% -2.50% -0.23% 2.61% 2.03%
Avg -0.05% -0.01% -0.34% 0.06% 0.65% 0.32%
 
OTC summary for Pres Yr 1
Avg 0.03% 0.16% -0.05% 0.09% 0.38% 0.61%
Win% 40% 60% 40% 70% 70% 50%
 
OTC summary for all years 1963 - 2004
Avg -0.01% 0.03% 0.04% 0.10% 0.29% 0.44%
Win% 43% 50% 56% 64% 69% 60%
 
SPX Pres Year 1
Year Mon Tue Wed Thur Fri Totals
1929-1 1.24% -0.82% 0.25% 0.16% -1.07% -0.24%
1933-1 4.41% -0.63% 0.45% 0.18% -2.79% 1.63%
1937-1 -1.39% 3.16% -0.48% 1.92% -2.15% 1.07%
1941-1 -0.10% 0.49% 1.75% -0.76% -0.96% 0.41%
 
1945-1 -0.32% 2.00% 0.95% 0.38% -0.50% 2.50%
1949-1 0.78% 1.42% -0.06% -0.76% 0.32% 1.69%
1953-1 -1.86% 0.84% 0.48% 0.26% -0.52% -0.80%
1957-1 -0.49% 0.13% 0.11% -0.65% -1.60% -2.49%
1961-1 -0.88% 1.01% 0.07% -0.71% 0.18% -0.33%
Avg -0.56% 1.08% 0.31% -0.30% -0.42% 0.11%
 
1965-1 0.29% -0.39% 0.55% 0.56% 0.03% 1.04%
1969-1 0.55% 0.08% -0.34% 0.29% 0.31% 0.89%
1973-1 -0.28% -0.36% 2.03% 0.83% 0.41% 2.63%
1977-1 -0.35% 0.06% 0.48% 0.26% -0.33% 0.12%
1981-1 -0.78% -0.74% -0.75% -1.45% -0.76% -4.48%
Avg -0.11% -0.27% 0.39% 0.10% -0.07% 0.04%
 
1985-1 -0.02% -0.83% 0.19% 0.92% -0.73% -0.46%
1989-1 -0.32% 0.30% -0.93% -0.67% 0.55% -1.06%
1993-1 0.07% -0.47% 0.37% -0.47% -0.13% -0.62%
1997-1 -0.45% 2.81% -0.28% 0.45% 0.34% 2.88%
2001-1 3.90% 0.88% -0.52% 1.15% 2.19% 7.60%
Avg 0.64% 0.54% -0.23% 0.28% 0.44% 1.67%
 
SPX summary for Pres Yr 1
Avg 0.21% 0.47% 0.23% 0.10% -0.38% 0.63%
Win% 37% 63% 63% 63% 42% 58%
 
SPX summary for all years 1928 - 2004
Avg 0.10% 0.06% 0.06% 0.13% -0.08% 0.26%
Win% 47% 54% 59% 58% 51% 60%

During the past week the market established a broad based up trend and next week has a positive seasonal bias.

I expect the major indices to be higher on Friday September 16 than they were on Friday September 9.

This report is free to anyone who wants it, so please tell your friends. If it is not for you, reply with REMOVE in the subject line.

Last weeks negative forecast was a miss. My expectation that the previous week's strength would be no more than a seasonally induced rally in a continuing down market was overly pessimistic.


 

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.

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