It looks like someone linked you here to our printer friendly page. Please make sure you go Back to Safehaven.com for more great articles just like this one!

Technical Market Report for November 24, 2012

By: Mike Burk | Saturday, November 24, 2012

The good news is:
• The market is closely following the average seasonal pattern and that pattern calls for another 2 weeks of strength.


The negatives

Most of the major indices have been up for 5 consecutive days so, for the short term, the market is overbought.

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.

A 4.5% jump in the index failed to turn OTC NH upward.

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

The pattern of NY NL is a little better, but, not as strong as it has been in previous rallies during the decline of the past 3 months.


The positives

New lows provide the best bottom indicator and they are giving a pretty clear signal. On Thursday November 15 there were 272 new lows on the NYSE and 187 on the NASDAQ. Last Friday there were 21 new lows on the NYSE and 19 on the NASDAQ. The holiday week, no doubt, distorted the numbers, but a 90% drop in new lows in a week is a pretty clear signal.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in orange. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

OTC NL turned sharply upward last week.

The chart below is similar to the one above except it shows the SPX in red and NY NL, in blue, has been calculated from NYSE data.

NY NL has also turned sharply upward.

The sharp drop in new lows suggests we have seen the low for a while.


Seasonality

Next week includes the last 5 trading days of November during the 4th year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the last 5 trading days of November during the 4th year of the Presidential Cycle.

OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1928 - 2011. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Average returns have been positive by all measures, but they have been distorted by what was probably a record in 2008.

Report for the last 5 days of November.
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 4
  Day5 Day4 Day3 Day2 Day1 Totals
1964-4 -0.16% 1 -0.40% 2 -0.18% 3 -0.16% 5 -0.36% 1 -1.26%
1968-4 0.03% 5 0.47% 1 0.20% 2 1.52% 3 0.68% 5 2.89%
 
1972-4 0.40% 5 -0.34% 1 0.11% 2 0.02% 3 0.17% 4 0.36%
1976-4 -0.28% 2 0.52% 3 0.80% 5 -0.37% 1 0.04% 2 0.72%
1980-4 -0.21% 5 -0.90% 1 0.58% 2 0.80% 3 0.53% 5 0.81%
1984-4 -0.22% 1 0.21% 2 -0.15% 3 -0.71% 4 -0.32% 5 -1.19%
1988-4 0.66% 3 -0.38% 5 -0.08% 1 0.56% 2 0.90% 3 1.66%
Avg 0.07% -0.18% 0.25% 0.06% 0.26% 0.47%
 
1992-4 -0.59% 1 1.11% 2 0.37% 3 0.18% 5 0.50% 1 1.57%
1996-4 1.30% 5 0.47% 1 0.06% 2 0.48% 3 0.41% 5 2.72%
2000-4 5.41% 5 -0.82% 1 -5.05% 2 -1.03% 3 -4.03% 4 -5.52%
2004-4 -0.04% 2 0.88% 3 -0.03% 5 0.23% 1 -0.48% 2 0.56%
2008-4 5.18% 5 6.33% 1 -0.50% 2 4.60% 3 0.23% 5 15.85%
Avg 2.25% 1.59% -1.03% 0.89% -0.67% 3.04%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.96% 0.60% -0.32% 0.51% -0.14% 1.60%
% Winners 50% 58% 50% 67% 67% 75%
MDD 11/30/2000 10.55% -- 11/30/1964 1.26% -- 11/30/1984 1.19%
 
OTC summary for all years 1963 - 2011
Averages 0.30% 0.25% 0.12% 0.36% -0.02% 1.01%
% Winners 55% 57% 65% 67% 65% 69%
MDD 11/30/2000 10.55% -- 11/30/1987 3.97% -- 11/30/1973 3.91%
 
SPX Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1928-4 0.77% 5 0.42% 1 0.46% 2 1.17% 3 0.37% 5 3.19%
 
1932-4 -1.02% 5 0.44% 6 -0.15% 1 -0.29% 2 -3.39% 3 -4.41%
1936-4 1.72% 2 -0.52% 3 1.46% 5 0.17% 6 -0.52% 1 2.31%
1940-4 -0.28% 2 -1.86% 3 0.00% 4 0.09% 5 0.38% 6 -1.66%
1944-4 0.08% 6 0.24% 1 -0.08% 2 0.55% 3 -0.16% 4 0.63%
1948-4 -1.84% 3 0.00% 5 0.00% 6 -0.80% 1 -0.27% 2 -2.92%
Avg -0.27% -0.34% 0.25% -0.06% -0.79% -1.21%
 
1952-4 -0.04% 5 0.59% 1 -0.24% 2 0.63% 3 0.55% 5 1.50%
1956-4 -0.60% 1 0.09% 2 -1.07% 3 -0.11% 4 1.58% 5 -0.11%
1960-4 0.14% 3 0.59% 5 -0.18% 1 -0.36% 2 -0.52% 3 -0.32%
1964-4 -0.32% 1 -0.31% 2 -0.34% 3 -0.33% 5 -0.87% 1 -2.17%
1968-4 0.31% 5 0.17% 1 0.73% 2 0.47% 3 0.57% 5 2.25%
Avg -0.10% 0.23% -0.22% 0.06% 0.26% 0.23%
 
1972-4 0.32% 5 -0.47% 1 -0.21% 2 0.04% 3 0.13% 4 -0.20%
1976-4 -0.61% 2 0.44% 3 0.72% 5 -0.69% 1 -0.33% 2 -0.47%
1980-4 -0.92% 5 -0.58% 1 0.74% 2 0.60% 3 0.25% 5 0.10%
1984-4 -0.82% 1 0.45% 2 -0.76% 3 -0.67% 4 -0.20% 5 -2.01%
1988-4 0.67% 3 -0.66% 5 0.53% 1 0.84% 2 1.03% 3 2.41%
Avg -0.27% -0.16% 0.20% 0.03% 0.18% -0.03%
 
1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.28% 1 1.10%
1996-4 0.80% 5 1.11% 1 -0.14% 2 -0.12% 3 0.27% 5 1.91%
2000-4 1.47% 5 0.54% 1 -0.95% 2 0.44% 3 -2.01% 4 -0.52%
2004-4 -0.03% 2 0.41% 3 0.08% 5 -0.34% 1 -0.40% 2 -0.29%
2008-4 6.32% 5 6.47% 1 0.66% 2 3.53% 3 0.96% 5 17.95%
Avg 1.64% 1.82% 0.00% 0.75% -0.18% 4.03%
 
SPX summary for Presidential Year 4 1928 - 2008
Averages 0.27% 0.39% 0.08% 0.24% -0.11% 0.87%
% Winners 48% 67% 43% 57% 52% 48%
MDD 11/30/1932 4.38% -- 11/30/1948 2.90% -- 11/30/2000 2.52%
 
SPX summary for all years 1928 - 2011
Averages 0.09% 0.15% 0.02% 0.03% 0.20% 0.50%
% Winners 55% 63% 51% 54% 57% 52%
MDD 11/28/1931 7.09% -- 11/30/1987 6.53% -- 11/29/1950 4.68%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth is holding above the elevated trend.

M2


Conclusion

The market is a bit overbought so we are likely to see a few days of weakness, but the seasonal pattern calls for another 2 weeks of strength.

I expect the major averages to be higher on Friday November 30 than they were on Friday November 23.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

In his latest newsletter, Jerry Minton looks at Alpha's seasonal strategies and the upcoming switch to equities. You can read it and sign up for his free newsletter at Alpha's homepage: http://alphaim.net/

Good Luck,

YTD W 17 /L 16/T 14

 

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