Technical Market Report

By: Mike Burk | Sat, Nov 26, 2005
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The good news is:
 • The NASDAQ composite (OTC), S&P 500 (SPX) and Wilshire 5000 all closed at multi year highs on Friday. By itself, that defines a bull market.

Short term

Last week we finally saw new lows dry up.

New lows on the NASDAQ fell from 34 on Monday to 8 on Friday, the lowest number in a long time.

As of last Friday the Wilshire 5000 (WIL5) and several other indices including the OTC, Russell 3000, SPX and S&P Mid cap had been up for 7 consecutive days.

Including last Friday the WIL5 has managed to rise for 7 or more consecutive days 6 times since 1998 and the index has always continued to move higher after a brief pull back.

The occurrences and their dates are listed below along with the depth of the pull back that followed and the number of days that it lasted.

8/8/2000 -1.5% 2 days
3/21/2003 -4.9% 6 days
9/4/2003 -2.2% 4 days
6/2/2004(9) -0.9% 1 day 9 consecutive up days
7/15/2005 -0.5% 1 day
11/25/2005

The chart below shows past 9 months with the WIL5 in red and an indicator that shows the percentage of the 7 previous trading days that were up, vertical dashed lines are drawn on the 1st trading day of each month. To reach the top of the screen there must have been 7 consecutive up days. The last occurrence was on July 15, 2005 about 2 weeks before and 2% below the early August high.

Intermediate term

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. The direction of SI's make good intermediate term indicators as of Friday they were all moving sharply upward.

Seasonality

Next week includes the last 3 trading days of November and the first 2 trading days of December. The OTC during this period has been up 70% of the time since 1963, the SPX has been up about 60% of the time since 1928.

The tables below show daily performance during the 1st year of the Presidential Cycle. There are summaries for both the 1st year of the Presidential Cycle and all years combined. Data for the OTC covers the period from 1963 - 2004 while SPX data runs from 1928 - 2004.

Last 3 days of November and first 2 days of December.
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 1
  Day3 Day2 Day1 Day1 Day2 Totals
1965-1 0.47% 5 0.47% 1 0.11% 2 0.52% 3 0.21% 4 1.78%
1969-1 -1.24% 2 0.05% 3 -0.11% 5 0.16% 1 -0.55% 2 -1.70%
1973-1 0.86% 3 -0.34% 4 -1.17% 5 -1.65% 1 -0.45% 2 -2.74%
1977-1 -0.26% 1 -0.83% 2 -0.05% 3 0.51% 4 0.41% 5 -0.21%
1981-1 0.49% 3 0.50% 5 0.17% 1 -0.12% 2 -0.39% 3 0.66%
Avg 0.06% -0.03% -0.21% -0.11% -0.15% -0.44%
 
1985-1 0.24% 2 0.81% 3 0.30% 5 -0.32% 1 0.06% 2 1.09%
1989-1 0.11% 2 -0.19% 3 0.06% 4 0.22% 5 0.26% 1 0.46%
1993-1 0.22% 5 -0.44% 1 0.38% 2 1.25% 3 0.38% 4 1.79%
1997-1 0.13% 2 0.35% 3 0.38% 5 1.88% 1 -1.49% 2 1.25%
2001-1 -2.48% 3 2.40% 4 -0.14% 5 -1.33% 1 3.06% 2 1.51%
Avg -0.36% 0.59% 0.20% 0.34% 0.45% 1.22%
 
OTC summary for Presidential year 1 1965 - 2001
Averages -0.15% 0.28% -0.01% 0.11% 0.15% 0.39%
% Winners 70% 60% 60% 60% 60% 70%
MDD 12/4/1973 3.56% -- 11/28/2001 2.48% -- 12/2/1969 1.69%
 
OTC summary for all years 1963 - 2004
Averages 0.01% 0.36% -0.10% 0.37% 0.09% 0.74%
% Winners 67% 71% 67% 67% 62% 71%
MDD 11/30/2000 9.81% -- 11/30/1987 3.97% -- 12/3/1974 3.89%
 
SPX Presidential Year 1
  Day3 Day2 Day1 Day1 Day2 Totals
1929-1 -1.16% 1 -2.91% 2 1.26% 3 0.14% 1 3.34% 2 0.67%
1933-1 -3.49% 1 0.10% 2 1.86% 3 0.30% 5 0.10% 6 -1.12%
1937-1 4.78% 6 -1.97% 1 1.37% 2 -1.26% 3 2.01% 4 4.93%
1941-1 -0.65% 4 -0.98% 5 -0.22% 6 -0.33% 1 2.09% 2 -0.08%
 
1945-1 -0.52% 3 -0.18% 4 0.94% 5 0.58% 6 0.87% 1 1.69%
1949-1 -0.56% 1 -0.19% 2 0.25% 3 0.56% 4 0.80% 5 0.87%
1953-1 0.08% 3 0.57% 5 0.41% 1 0.08% 2 0.69% 3 1.82%
1957-1 -2.65% 2 2.89% 3 1.14% 5 -0.86% 1 0.02% 2 0.55%
1961-1 -0.14% 2 -0.07% 3 -0.53% 4 0.64% 5 0.32% 1 0.23%
Avg -0.76% 0.61% 0.44% 0.20% 0.54% 1.03%
 
1965-1 0.10% 5 -0.25% 1 -0.21% 2 -0.12% 3 -0.32% 4 -0.80%
1969-1 -0.32% 2 0.36% 3 0.58% 5 -0.63% 1 -0.61% 2 -0.63%
1973-1 2.04% 3 -0.35% 4 -1.39% 5 -2.15% 1 -0.33% 2 -2.17%
1977-1 -0.67% 1 -1.55% 2 0.30% 3 -0.15% 4 -0.02% 5 -2.10%
1981-1 0.44% 3 0.84% 5 1.01% 1 -0.20% 2 -1.12% 3 0.97%
Avg 0.32% -0.19% 0.06% -0.65% -0.48% -0.95%
 
1985-1 0.16% 2 0.93% 3 -0.18% 5 -0.85% 1 0.20% 2 0.26%
1989-1 0.05% 2 -0.63% 3 0.70% 4 1.34% 5 0.22% 1 1.68%
1993-1 0.15% 5 -0.25% 1 -0.02% 2 0.02% 3 0.26% 4 0.16%
1997-1 0.44% 2 0.09% 3 0.40% 5 2.03% 1 -0.32% 2 2.63%
2001-1 -1.83% 3 1.03% 4 -0.07% 5 -0.84% 1 1.32% 2 -0.38%
Avg -0.21% 0.24% 0.16% 0.34% 0.34% 0.87%
 
SPX summary for Presidential year 1 1929 - 2001
Averages -0.20% -0.13% 0.40% -0.09% 0.50% 0.48%
% Winners 47% 42% 63% 47% 68% 63%
MDD 12/4/1973 4.16% -- 11/26/1929 4.04% -- 11/27/1933 3.49%
 
SPX summary for all years 1928 - 2004
Averages -0.05% 0.00% 0.15% 0.06% 0.09% 0.25%
% Winners 49% 52% 55% 52% 56% 58%
MDD 11/30/1987 6.53% -- 12/2/1931 5.04% -- 12/2/1932 4.99%

December

On average December is usually up, however Decembers have been weakest during the 1st year of the Presidential cycle.

The chart below shows the OTC average December for all years in yellow and the average for the 1st year of the Presidential Cycle in white. Dates covered are 1963 - 2004.

The next chart shows the SPX average December for all years in grey and the average for the 1st year of the Presidential Cycle in white. Dates covered are 1928 - 2004.

Conclusion

Seasonally Thanksgiving week is usually strong and last week was stronger than usual and breadth indicators confirmed the strength in prices. This strength suggests more to come on the upside.

I expect the major indices to be higher on Friday December 2 than they were on Friday November 25.

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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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