Technical Market Report

By: Mike Burk | Sun, Feb 19, 2006
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The good news is:
 • The DJIA hit a multiyear high last week and the DJT hit an all time high.

Short term

The chart below covers the period from late last September with dashed vertical lines on the 1st trading day of each month.

The NASDAQ new high indicator (OTC NH) is a 10% trend (19 day EMA) of NASDAQ new highs. The Russell 2000 (R2K) is shown in red and OTC NH is shown in green.

The indicator turned upward last week.

As of Friday the value of the indicator was 183 so more than 183 new highs will move the indicator upward while less than 183 will move the indicator downward.

Intermediate term

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

The chart below covers the period from last September through last Friday showing the R2K in red and SI's calculated from NASDAQ advancing - declining issues, new highs - new lows and upside - downside volume. All of the SI's turned upward last week.

The next chart covers the period from last April through last Friday. It shows the R2K in red and momentum of downside volume in blue.

The indicator usually moves in the same direction as prices, often with a little lead. This indicator is moving sharply upward.

Seasonality

Next week can be viewed from several seasonal perspectives.
1. It is the week after options expiration.
2. It is the week after the Presidents day Holiday.
3. It will be the first 4 of the last 6 trading days of the month.

I am only going to look at the 3rd, because it will always be the same.

The tables below show the last 6 trading days in February during the 2nd year of the Presidential Cycle with summaries for the 2nd year of the Presidential Cycle and all years. NASDAQ composite (OTC) data runs from 1963 to the present and S&P 500 (SPX) data runs from 1928 to the present.

There is a positive bias to the period.

Last 6 days of February
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.
MDD = Maximum Draw Down

OTC Presidential Year 2
  Day6 Day5 Day4 Day3 Day2 Day1 Totals
1966-2 0.13% 5 0.97% 1 0.03% 3 -0.35% 4 -0.40% 5 0.35% 1 0.74%
1970-2 0.67% 4 0.02% 5 -0.31% 2 -0.05% 3 0.82% 4 -0.16% 5 0.99%
1974-2 0.67% 4 0.82% 5 -0.23% 1 0.42% 2 1.02% 3 0.31% 4 3.01%
1978-2 -0.25% 2 0.14% 3 0.03% 4 0.53% 5 -0.47% 1 -0.73% 2 -0.76%
1982-2 -0.40% 5 -0.87% 1 -0.88% 2 0.61% 3 0.48% 4 -0.01% 5 -1.07%
Avg 0.16% 0.21% -0.27% 0.23% 0.29% -0.05% 0.58%
 
1986-2 0.72% 5 -0.04% 1 -0.17% 2 0.11% 3 0.94% 4 0.26% 5 1.81%
1990-2 -0.55% 3 0.29% 4 -0.76% 5 0.34% 1 0.39% 2 0.76% 3 0.48%
1994-2 -0.18% 5 0.29% 2 -0.26% 3 -1.23% 4 0.56% 5 1.11% 1 0.30%
1998-2 0.06% 5 1.37% 1 -0.75% 2 1.60% 3 0.60% 4 -0.37% 5 2.51%
2002-2 -3.34% 4 0.48% 5 2.63% 1 -0.17% 2 -0.85% 3 -1.16% 4 -2.41%
Avg -0.66% 0.48% 0.14% 0.13% 0.33% 0.12% 0.54%
 
OTC summary for Presidential Year 2 1966 - 2002
Averages -0.25% 0.35% -0.07% 0.18% 0.31% 0.04% 0.56%
% Winners 50% 80% 30% 60% 70% 50% 70%
MDD 2/21/2002 3.34% -- 2/23/1982 2.14% -- 2/24/1994 1.48%
 
OTC summary for all years 1963 - 2005
Averages -0.07% -0.07% 0.12% 0.13% -0.04% 0.00% 0.06%
% Winners 42% 51% 58% 53% 60% 51% 60%
MDD 2/28/2001 7.19% -- 2/28/1969 4.69% -- 2/27/1973 4.17%
 
SPX Presidential Year 2
  Day6 Day5 Day4 Day3 Day2 Day1 Totals
1930-2 1.24% 5 -1.05% 1 0.04% 2 1.85% 3 -0.13% 4 0.87% 5 2.82%
1934-2 0.26% 3 -2.62% 5 -1.71% 6 -2.29% 1 1.12% 2 -0.46% 3 -5.69%
1938-2 1.70% 1 2.64% 3 -1.46% 4 0.52% 5 -0.26% 6 -1.73% 1 1.41%
1942-2 0.35% 6 0.24% 2 -0.70% 3 0.71% 4 0.82% 5 0.00% 6 1.42%
 
1946-2 -1.86% 3 2.01% 4 -4.57% 1 -0.59% 2 2.02% 3 0.76% 4 -2.23%
1950-2 -0.17% 2 0.23% 4 0.41% 5 -0.12% 6 0.12% 1 -0.35% 2 0.12%
1954-2 0.39% 4 -0.15% 5 -0.35% 2 0.00% 3 0.31% 4 0.93% 5 1.12%
1958-2 -0.07% 5 -0.56% 1 -0.10% 2 0.76% 3 -0.59% 4 0.39% 5 -0.16%
1962-2 0.36% 2 -0.48% 3 -0.23% 5 -0.57% 1 0.19% 2 0.10% 3 -0.64%
Avg -0.27% 0.21% -0.97% -0.10% 0.41% 0.37% -0.36%
 
1966-2 -0.27% 5 -0.58% 1 -0.42% 3 -0.64% 4 0.28% 5 0.09% 1 -1.56%
1970-2 0.37% 4 0.31% 5 -0.05% 2 1.55% 3 -0.50% 4 0.67% 5 2.35%
1974-2 1.36% 4 0.72% 5 -0.38% 1 1.02% 2 0.42% 3 -0.19% 4 2.95%
1978-2 -0.42% 2 -0.03% 3 0.09% 4 0.97% 5 -0.87% 1 -0.78% 2 -1.04%
1982-2 -0.53% 5 -1.44% 1 -0.07% 2 1.76% 3 -0.23% 4 -0.09% 5 -0.60%
Avg 0.10% -0.21% -0.17% 0.93% -0.18% -0.06% 0.42%
 
1986-2 1.08% 5 -0.12% 1 -0.25% 2 0.11% 3 1.22% 4 0.07% 5 2.11%
1990-2 -0.10% 3 -0.60% 4 -0.48% 5 1.39% 1 0.48% 2 0.49% 3 1.20%
1994-2 -0.56% 5 0.81% 2 -0.16% 3 -1.37% 4 0.39% 5 0.23% 1 -0.67%
1998-2 0.57% 5 0.38% 1 -0.72% 2 1.19% 3 0.56% 4 0.06% 5 2.04%
2002-2 -1.55% 4 0.82% 5 1.80% 1 0.00% 2 0.05% 3 -0.28% 4 0.83%
Avg -0.11% 0.26% 0.04% 0.27% 0.54% 0.11% 1.10%
 
SPX summary for Presidential Year 2 1930 - 2002
Averages 0.11% 0.03% -0.49% 0.33% 0.28% 0.04% 0.30%
% Winners 53% 47% 21% 58% 68% 58% 58%
MDD 2/26/1934 6.47% -- 2/26/1946 5.14% -- 2/28/1938 2.91%
 
SPX summary for all years 1928 - 2005
Averages 0.08% -0.18% -0.09% 0.06% 0.02% 0.12% 0.01%
% Winners 55% 47% 43% 54% 56% 58% 54%
MDD 2/27/1933 7.83% -- 2/26/1934 6.47% -- 2/26/1946 5.14%

Conclusion

Most of the indicators turned upward last week and the remainder of the month has a positive seasonal bias.

I expect the major indices to be higher on Friday February 24 than they were on Friday February 17.

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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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