Technical Market Report for April 24, 2010

By: Mike Burk | Sun, Apr 25, 2010
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The good news is:
• All of the major indices closed at recovery highs on Friday.

The negatives

The market is overbought.

By my way of counting where all of the major indices must be down to count the week as down, there has not been a down week in the past 11 weeks.

Sellers have been exhausted after just 1 or 2 days.

The Positives

Most of the breadth indicators confirmed Friday's highs. There were a lot of new highs on Friday (NYSE 634 & NASDAQ 363) and virtually no new lows (NYSE 12 & NASDAQ 7). The NASDAQ AD line hit a new recovery high on Friday; even NYSE volume picked up.

The chart below shows most of the major indices and covers the period since the rally began March 9, 2009. Dashed vertical lines have been drawn on the 1st trading day of each month. The indices have been plotted on log scales so you can see their relative performance. The legend shows the date range, the index symbol followed by its current level relative to the starting point then a low and high from the starting point (the starting point was the low so the first number in that sequence is the initial move before the first down day). The next line begins with MDD (maximum draw down on a percentage basis) followed by the date of the MDD then CAR (Compound Annual Return or annualized return) for the period shown.

The indices shown are:
SPX = S&P 500
OTC = NASDAQ composite
R2K = Russell 2000
MID = S&P mid cap

The numbers are remarkable. The lowest CAR for the period is 68.76% (SPX) and the highest is 98.7% (R2K). The highest MDD is 9.86% (R2K) and the lowest 8.13% (SPX).

CAR %

The next chart is similar to the one above except it covers past 11 weeks (50 trading days without holidays) from the February 10, 2010 low.

The numbers are amazing. CAR's range from a low of 93.75% (SPX) to 203.34% (R2K) while MDD's have all been less than 2%.

CAR %

The chart above is remarkable because it begins nearly a year into this rally. The next chart shows the first 50 trading days of the rally beginning March 9 last year.

The CAR's range from a low of 343.58% (SPX) to 526.20% (R2K). The MDD's were much higher ranging from 5.63% for the OTC to 7.82% for the R2K.

CAR %

Seasonality

Next week includes the last 5 trading days of April during the 2nd year of the Presidential Cycle.

The tables below show the return on a percentage basis for the last 5 trading of April during the 2nd year of the Presidential Cycle. OTC data covers the period from 1963 - 2009 and S&P 500 data from 1928 - 2009. There are summaries for both the 2nd year of the Presidential Cycle and all years combined.

On average the coming week has not been a good one and it has been at its worst during the 2nd year of the Presidential Cycle.

Report for the last 5 days of April.
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 2
  Day5 Day4 Day3 Day2 Day1 Totals
1966-2 0.25% 1 1.10% 2 0.03% 3 -0.81% 4 -0.07% 5 0.50%
 
1970-2 -2.78% 5 -0.49% 1 -2.01% 2 -2.66% 3 1.59% 4 -6.35%
1974-2 -1.72% 3 -1.05% 4 0.23% 5 0.26% 1 0.46% 2 -1.81%
1978-2 0.25% 1 0.60% 2 0.37% 3 -0.10% 4 0.51% 5 1.63%
1982-2 0.47% 1 -0.58% 2 0.09% 3 -0.40% 4 0.30% 5 -0.12%
1986-2 0.52% 4 0.21% 5 -0.23% 1 -0.57% 2 -1.53% 3 -1.60%
Avg -0.65% -0.26% -0.31% -0.70% 0.27% -1.65%
 
1990-2 -0.21% 2 0.33% 3 0.12% 4 -0.73% 5 0.50% 1 0.00%
1994-2 0.53% 5 1.14% 1 0.47% 2 -0.34% 4 0.29% 5 2.09%
1998-2 -0.66% 5 -2.61% 1 0.63% 2 1.08% 3 0.91% 4 -0.65%
2002-2 -0.98% 3 0.02% 4 -2.91% 5 -0.42% 1 1.89% 2 -2.39%
2006-2 -0.40% 1 -0.13% 2 0.14% 3 0.49% 4 -0.95% 5 -0.86%
Avg -0.35% -0.25% -0.31% 0.01% 0.53% -0.36%
 
OTC summary for Presidential Year 2 1966 - 2006
Averages -0.43% -0.13% -0.28% -0.38% 0.36% -0.87%
% Winners 45% 55% 73% 27% 73% 36%
MDD 4/29/1970 7.72% -- 4/29/2002 4.24% -- 4/27/1998 3.25%
 
OTC summary for all years 1963 - 2009
Averages -0.13% -0.01% -0.03% 0.16% 0.29% 0.29%
% Winners 55% 47% 70% 64% 68% 60%
MDD 4/29/1970 7.72% -- 4/30/2004 6.32% -- 4/29/1999 4.66%
 
SPX Presidential Year 2
  Day5 Day4 Day3 Day2 Day1 Totals
1930-2 -0.12% 5 0.20% 6 -2.40% 1 -0.12% 2 0.69% 3 -1.76%
1934-2 -0.55% 3 -1.37% 4 0.09% 5 -0.83% 6 -2.33% 1 -4.99%
1938-2 -2.45% 2 1.20% 3 -3.08% 4 0.10% 5 -0.82% 6 -5.03%
1942-2 0.26% 6 -0.40% 1 -0.93% 2 1.87% 3 0.66% 4 1.47%
1946-2 -0.59% 4 0.22% 5 0.86% 6 -0.11% 1 0.21% 2 0.59%
Avg -0.69% -0.03% -1.09% 0.18% -0.32% -1.94%
 
1950-2 0.00% 2 -0.39% 3 0.56% 4 0.56% 5 0.61% 6 1.34%
1954-2 0.36% 1 -0.43% 2 0.00% 3 1.51% 4 0.28% 5 1.73%
1958-2 0.79% 4 0.51% 5 -0.32% 1 -0.51% 2 1.02% 3 1.50%
1962-2 -0.10% 2 -1.10% 3 -0.97% 4 -1.12% 5 -1.60% 1 -4.89%
1966-2 -0.21% 1 -0.10% 2 -0.25% 3 -0.69% 4 -0.08% 5 -1.32%
Avg 0.17% -0.30% -0.20% -0.05% 0.05% -0.33%
 
1970-2 -0.33% 5 -1.58% 1 -1.46% 2 1.92% 3 -0.35% 4 -1.80%
1974-2 -1.64% 3 -0.81% 4 0.68% 5 -0.20% 1 0.34% 2 -1.63%
1978-2 1.52% 1 0.91% 2 0.19% 3 -0.99% 4 1.01% 5 2.63%
1982-2 0.52% 1 -1.06% 2 -0.63% 3 -0.96% 4 0.27% 5 -1.86%
1986-2 0.11% 4 0.11% 5 0.33% 1 -1.06% 2 -2.07% 3 -2.58%
Avg 0.04% -0.49% -0.18% -0.26% -0.16% -1.05%
 
1990-2 -0.21% 2 0.51% 3 0.27% 4 -1.14% 5 0.51% 1 -0.07%
1994-2 -0.25% 5 1.13% 1 -0.19% 2 -0.61% 4 0.40% 5 0.49%
1998-2 -1.05% 5 -1.93% 1 -0.13% 2 0.88% 3 1.57% 4 -0.66%
2002-2 -0.71% 3 -0.15% 4 -1.39% 5 -1.01% 1 1.08% 2 -2.18%
2006-2 -0.24% 1 -0.49% 2 0.28% 3 0.33% 4 0.07% 5 -0.05%
Avg -0.49% -0.19% -0.23% -0.31% 0.73% -0.49%
 
SPX summary for Presidential Year 2 1930 - 2006
Averages -0.24% -0.25% -0.42% -0.11% 0.07% -0.95%
% Winners 30% 40% 40% 35% 70% 35%
MDD 4/30/1938 5.00% -- 4/30/1934 4.91% -- 4/30/1962 4.80%
 
SPX summary for all years 1928 - 2009
Averages -0.20% 0.06% -0.13% -0.05% 0.30% -0.03%
% Winners 48% 58% 49% 49% 59% 56%
MDD 4/29/1932 7.02% -- 4/29/1936 6.82% -- 4/29/1931 6.02%

Money Supply (M2)

The money supply chart below was provided by Gordon Harms. Money supply has been under trend all year and the deterioration has been accelerating.

M2 Money Supply

Conclusion

All of the major indices closed at recovery highs on Friday and those highs were led by the secondaries and confirmed by most of the indicators. The implication is there will be more highs in the near future. On the other hand the market is about as overbought as it has ever been.

I expect the major averages to be lower on Friday April 30 than they were on Thursday April 23.

Last weeks negative forecast was a miss. This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html.

In his latest newsletter, Jerry Minton details some of the information available at the Alpha website, such as how to convert a taxable mutual fund portfolio into a 100% liquid tax-deferred portfolio. To find out about this and many more investment "goodies" go to www.alphaim.net to sign-up for a free subscription.

Thank you,

 


 

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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