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Technical Market Report for June 7, 2014

By: Mike Burk | Saturday, June 7, 2014

The good news is:
• The market had a good week, the S&P 500 (SPX), Dow Jones Industrial Average (DJIA) and S&P mid cap (MID) all closed at all time highs last Friday. For the week, the secondaries were stronger than the blue chips.


The negatives

The market is overbought, the major indices have been going straight up for the past 3 weeks on anemic volume.

The chart below covers the past 6 months showing the SPX in red and a 5% trend (39 day EMA) of NYSE upside volume (NY UV), in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY UV shot up when the market rallied at the end of January, but has remained subdued during this recent rally. This rally has been driven by a lack of sellers rather than exuberant buyers.

NY UV Chart

The next chart is similar to the one above except it shows NASDAQ composite (OTC) in blue, and OTC UV, in green has been calculated from NASDAQ data.

OTC UV has been a little weaker than NY UV.

OTC UV Chart

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

This chart can be read as either a positive or negative. On the plus side OTC NH has been rising steadily for the past 2 weeks on the negative side, it is only slightly off its low of the past 2 years while the OTC is less than 1% off its multi year high.

OTC NH Chart


The positives

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

NY HL Ratio rose to a very strong 94%.

NY HL Ratio Chart

The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.

OTC HL Ratio, at 73% is well above its neutral line.

OTC HL Ratio Chart

The next chart shows the SPX in red and a 10% trend of NYSE new highs (NY NH) in green.

NY NH has broken out of its long running down trend in the past 2 weeks.

NY NH Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of June during the 2nd year of the Presidential Cycle.

The tables below show the change, on a percentage basis, of the OTC and SPX for the 5 trading days prior to the 2nd Friday of June during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2013 while SPX data runs from 1953 through 2013. There are summaries for both the 2nd year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.

Average returns for the coming week have been negative by all measures.

Report for the week before the 2nd Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.25% -0.52% -0.63% 0.00% 0.51% -0.39%
1970-2 -2.19% -0.49% 1.17% 0.13% -1.12% -2.50%
 
1974-2 0.25% -0.69% -0.29% 0.17% -0.58% -1.14%
1978-2 0.88% 0.61% 0.20% 0.72% 0.34% 2.76%
1982-2 -0.56% -0.32% -1.35% 0.25% 1.27% -0.71%
1986-2 -1.38% -0.48% 0.66% 0.28% 0.77% -0.15%
1990-2 0.75% -0.21% 0.08% -0.19% -0.69% -0.27%
Avg -0.01% -0.22% -0.14% 0.25% 0.22% 0.10%
 
1994-2 0.14% -0.56% -1.29% -0.12% 0.74% -1.09%
1998-2 0.27% 0.73% -1.53% -1.33% -0.27% -2.12%
2002-2 -0.31% -2.19% 1.47% -1.47% 0.53% -1.97%
2006-2 -2.24% -0.32% -0.51% -0.30% -0.48% -3.85%
2010-2 -2.04% -0.15% -0.54% 2.77% 1.12% 1.16%
Avg -0.84% -0.50% -0.48% -0.09% 0.33% -1.57%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.51% -0.38% -0.21% 0.08% 0.18% -0.85%
Win% 50% 17% 42% 55% 58% 17%
 
OTC summary for all years 1963 - 2013
Avg -0.22% -0.19% 0.01% 0.08% 0.10% -0.23%
Win% 49% 29% 52% 66% 61% 39%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.38% -2.24% -0.67% 0.67% 0.85% -1.77%
1958-2 -0.16% -0.20% 0.02% 0.58% 0.60% 0.85%
1962-2 -3.55% 0.52% 1.42% 0.02% 0.09% -1.50%
1966-2 -0.74% -0.69% 0.12% 0.67% 1.10% 0.45%
1970-2 0.16% -0.05% -1.01% -1.36% -0.32% -2.59%
Avg -0.93% -0.53% -0.02% 0.12% 0.46% -0.91%
 
1974-2 0.59% -0.88% -0.24% 0.30% -1.13% -1.35%
1978-2 1.84% 0.37% -0.20% 0.09% -0.28% 1.83%
1982-2 0.03% -0.44% -0.58% 0.57% 1.49% 1.05%
1986-2 -2.32% -0.16% 0.65% 0.15% 1.76% 0.07%
1990-2 1.17% -0.21% -0.46% -0.50% -1.22% -1.22%
Avg 0.26% -0.26% -0.17% 0.12% 0.12% 0.08%
 
1994-2 -0.27% -0.15% -0.25% 0.18% 0.18% -0.32%
1998-2 0.16% 0.24% -0.55% -1.59% 0.38% -1.35%
2002-2 0.31% -1.66% 0.66% -1.05% -0.23% -1.97%
2006-2 -1.78% -0.11% -0.61% 0.14% -0.45% -2.81%
2010-2 -1.35% 1.10% -0.59% 2.95% 0.44% 2.54%
Avg -0.59% -0.12% -0.27% 0.13% 0.06% -0.78%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.42% -0.30% -0.15% 0.12% 0.22% -0.54%
Win% 47% 27% 33% 73% 60% 40%
 
SPX summary for all years 1953 - 2013
Avg -0.23% -0.06% 0.02% 0.10% 0.16% -0.01%
Win% 44% 43% 47% 59% 61% 46%


Money Supply (M2)

The Money supply chart has been provided by Gordon Harms. M2 has growth declined a little last week.

SPX and M2 Money Supply Charts


Conclusion

The market looks like it bottomed in late May, but, that bottom coincided with the seasonal end of month / beginning of month rally that was quite a bit stronger than usual. Seasonally next week has been very weak.

I expect the major averages to be lower on Friday June 13 than they were on Friday June 6.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 7/L 8/T 8

 

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