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Technical Market Report for December 22, 2012

By: Mike Burk | Saturday, December 22, 2012

The good news is:
• The remainder of the year is usually influenced by strong, positive, seasonal factors.

Volume has been unusually high for this time of the year. Usually volume begins falling off around November 1 and hits its low for the year at the end of the year. That will not be the case this year.


The negatives

The number of new highs picked up a bit last week, but remains disappointing.

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.

OTC_NH continued to lag.

OTC New Highs

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.

NY NH has been even weaker than OTC NH.

NY NH has been even weaker than OTC NH


The positives

Seasonally, for the remainder of the year, the market typically rises on low volume.

The chart below covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs / (new highs + new lows), (OTC HL Ratio) in red. Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio finished the week at a strong 69%.

OTC HL Ratio finished the week at a strong 69%

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

NY HL Ratio has been very strong.

NY HL Ratio has been very strong


Seasonality

Next week includes 4 of the last 5 trading days remaining in 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 the 4th year of the Presidential Cycle. Including new years eve a week from next Monday.

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.

Report includes the last 5 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 4
  Day5 Day4 Day3 Day2 Day1 Totals
1964-4 -0.46% 2 0.20% 4 0.83% 5 0.34% 1 0.96% 2 1.88%
1968-4 -0.25% 5 -0.17% 2 0.08% 3 -0.05% 4 -0.16% 5 -0.55%
 
1972-4 -0.21% 1 0.21% 2 0.57% 3 0.36% 4 1.02% 5 1.94%
1976-4 0.65% 3 1.00% 5 -0.25% 1 -0.35% 2 1.24% 3 2.28%
1980-4 -0.13% 1 0.03% 3 0.15% 4 0.40% 5 0.21% 1 0.65%
1984-4 0.12% 5 0.05% 2 -0.04% 3 0.18% 4 0.56% 5 0.86%
1988-4 0.52% 4 -2.28% 1 -0.02% 2 1.28% 3 0.23% 4 -0.27%
Avg 0.19% -0.20% 0.08% 0.37% 0.65% 1.09%
 
1992-4 1.04% 2 1.77% 4 1.14% 5 2.48% 1 1.14% 2 7.58%
1996-4 0.61% 5 0.24% 2 -0.12% 3 -0.56% 4 0.95% 5 1.11%
2000-4 0.15% 1 -0.08% 2 1.75% 3 -0.11% 4 0.80% 5 2.50%
2004-4 -0.28% 3 0.20% 5 1.69% 1 0.17% 2 -0.32% 3 1.45%
2008-4 0.80% 1 0.40% 3 -1.75% 4 -0.09% 5 -0.83% 1 -1.46%
Avg 0.46% 0.51% 0.54% 0.38% 0.35% 2.24%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.21% 0.13% 0.34% 0.34% 0.48% 1.50%
% Winners 58% 75% 58% 58% 75% 75%
MDD 12/29/2000 3.41% -- 12/31/1968 2.01% -- 12/29/2008 1.30%
 
OTC summary for all years 1963 - 2011
Averages 0.27% 0.19% 0.09% 0.30% 0.29% 1.14%
% Winners 63% 69% 52% 65% 73% 77%
MDD 12/29/2000 3.41% -- 12/31/2002 3.34% -- 12/31/2007 2.65%
 
SPX Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1932-4 0.13% 4 -2.51% 1 2.58% 2 1.76% 3 0.25% 4 2.20%
1936-4 0.23% 4 -0.08% 5 -0.61% 6 2.07% 1 0.98% 2 2.59%
1940-4 -0.56% 2 -0.57% 3 0.89% 4 0.32% 5 0.24% 6 0.33%
1944-4 -0.17% 1 -0.95% 2 0.00% 3 1.83% 4 -0.17% 5 0.54%
1948-4 -0.85% 5 -0.13% 6 -0.40% 1 1.20% 2 0.53% 3 0.34%
Avg -0.25% -0.85% 0.49% 1.44% 0.36% 1.20%
 
1952-4 -0.42% 3 0.90% 4 0.17% 5 0.00% 6 0.34% 1 0.98%
1956-4 0.20% 5 -0.62% 2 -0.38% 3 0.22% 4 0.73% 5 0.16%
1960-4 0.07% 4 -0.03% 1 0.54% 2 0.79% 3 0.20% 4 1.57%
1964-4 0.22% 2 0.47% 4 0.16% 5 0.16% 1 0.62% 2 1.63%
1968-4 -0.19% 5 0.06% 2 0.68% 3 -0.02% 4 0.60% 5 1.14%
Avg -0.03% 0.16% 0.24% 0.23% 0.50% 1.10%
 
1972-4 0.21% 1 0.99% 2 0.26% 3 -0.42% 4 0.30% 5 1.34%
1976-4 0.82% 3 0.88% 5 -0.13% 1 -0.40% 2 0.47% 3 1.64%
1980-4 0.07% 1 0.11% 3 0.17% 4 -0.11% 5 0.09% 1 0.33%
1984-4 -0.03% 5 0.94% 2 0.35% 3 -0.29% 4 0.04% 5 1.02%
1988-4 -0.45% 4 -2.56% 1 -0.40% 2 1.34% 3 -0.31% 4 -2.39%
Avg 0.12% 0.07% 0.05% 0.02% 0.12% 0.39%
 
1992-4 0.63% 2 1.38% 4 0.40% 5 2.14% 1 0.47% 2 5.02%
1996-4 0.24% 5 0.38% 2 0.04% 3 -0.07% 4 0.29% 5 0.89%
2000-4 -0.09% 1 0.04% 2 0.40% 3 0.07% 4 0.33% 5 0.75%
2004-4 -0.18% 3 0.17% 5 1.24% 1 0.01% 2 0.21% 3 1.45%
2008-4 0.81% 1 0.08% 3 -1.42% 4 0.14% 5 -0.69% 1 -1.07%
Avg 0.28% 0.41% 0.13% 0.46% 0.12% 1.41%
 
SPX summary for Presidential Year 4 1932 - 2008
Averages 0.03% -0.05% 0.23% 0.54% 0.28% 1.02%
% Winners 55% 60% 65% 65% 85% 90%
MDD 12/31/1996 2.12% -- 12/27/1944 1.37% -- 12/30/1968 1.34%
 
SPX summary for all years 1929 - 2011
Averages 0.03% 0.14% 0.29% 0.48% 0.18% 1.08%
% Winners 54% 63% 60% 74% 64% 81%
MDD 12/28/1937 6.78% -- 12/29/1987 3.39% -- 12/29/1930 2.90%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth leveled off last week.

M2


Conclusion

Positive seasonality should dominate for the rest of the year.

I expect the major averages to be higher on Friday December 28 than they were on Friday December 21.

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 current letter, Jerry Minton calls our current condition one of "Financial Repression". You can read about it and sign up for his letter at: http://alphaim.net/

Good Luck,

YTD W 19 /L 16/T 16

 

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