Technical Market Report for June 19, 2010

By: Mike Burk | Sat, Jun 19, 2010
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The good news is:
• The market has been rallying during what has historically been a weak period.


The negatives

In spite of a 6% - 8% rally over the past week and a half new highs have remained dormant at relatively low levels.

The chart below is an update of one I showed last week covering the past year showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH is not confirming the strength in prices.

SPX and NY New Highs

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

NASDAQ and NASDAQ New Highs


The positives

Although there were not many new highs, they exceeded new lows every day last week on both the NYSE and NASDAQ.

The chart below covers the past year showing the SPX in red and the ratio of NYSE new highs to new highs + new lows (NY HL Ratio) in dark blue. Dashed horizontal lines have been drawn at 10% levels of the indicator the line is solid at the neutral 50% level.

NY HL Ratio is relatively strong at 80%.

SPX and NY New Hi/Low ratio

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

Although not as strong as NY HL Ratio, OTC HL Ratio went positive last week.

NASDAQ and Hi/Low ratio


Seasonality

Next week includes the 5 trading days prior to the 4th Friday of June during the 2nd year of the Presidential Cycle.

The tables below show the return on a percentage basis for the 5 trading days prior to the 4th Friday of June during the 2nd year of the Presidential Cycle. OTC data covers the period from 1963 - 2009 and SPX data from 1953 - 2009. 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.

By all measures average returns have been negative over the coming week and the 2nd year of the Presidential Cycle has been the worst of all.

Report for the week before the 4th Friday of June.
The number following the year is the position in the presidential cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.03% 0.22% 0.30% 0.27% -0.82% -0.06%
 
1970-2 0.87% -0.03% -2.69% -0.34% -1.10% -3.29%
1974-2 -0.29% 0.60% -1.36% -1.84% -1.13% -4.03%
1978-2 -0.62% -0.72% -1.15% 0.04% 0.05% -2.40%
1982-2 -0.30% 0.63% 1.07% 0.15% -0.37% 1.18%
1986-2 -0.01% 0.53% 0.83% 0.16% 0.16% 1.67%
Avg -0.07% 0.20% -0.66% -0.36% -0.48% -1.37%
 
1990-2 -1.45% -0.06% 0.06% 0.10% -0.42% -1.76%
1994-2 -1.44% -1.40% 0.56% -1.67% -1.01% -4.96%
1998-2 1.38% 2.14% 1.79% -0.77% 0.33% 4.88%
2002-2 1.34% -2.49% 0.38% 2.09% 0.27% 1.60%
2006-2 -0.92% -0.16% 1.62% -0.85% -0.07% -0.38%
Avg -0.22% -0.39% 0.88% -0.22% -0.18% -0.12%
 
OTC summary for Presidential Year 2 1966 - 2006
Avg -0.13% -0.07% 0.13% -0.24% -0.37% -0.69%
Win% 27% 45% 73% 55% 36% 36%
 
OTC summary for all years 1963 - 2009
Avg -0.17% 0.02% 0.13% -0.05% -0.11% -0.18%
Win% 39% 61% 53% 61% 52% 50%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.07% 0.07% 0.17% 0.45% -0.21% 0.55%
1958-2 -0.36% -0.38% 0.25% 0.47% 0.13% 0.11%
1962-2 -0.27% -0.36% -1.37% -2.17% -1.70% -5.87%
1966-2 -0.03% 0.27% 0.16% -0.40% 0.09% 0.08%
 
1970-2 -0.53% -2.45% -1.06% 0.07% -0.74% -4.72%
1974-2 0.26% 1.47% -1.47% -1.55% -0.36% -1.65%
1978-2 0.07% -1.01% -0.52% 0.24% -0.41% -1.62%
1982-2 -0.07% 1.03% 1.70% -0.28% -0.63% 1.74%
1986-2 -0.94% 0.72% 0.77% -0.08% 0.35% 0.82%
Avg -0.24% -0.05% -0.12% -0.32% -0.36% -1.08%
 
1990-2 -1.66% 0.45% 0.18% 0.38% -1.40% -2.06%
1994-2 -0.65% -0.91% 0.39% -0.76% -1.52% -3.45%
1998-2 0.24% 1.48% 1.20% -0.32% 0.35% 2.94%
2002-2 0.36% -1.67% -0.27% 1.76% 0.00% 0.18%
2006-2 -0.91% 0.00% 0.97% -0.53% -0.09% -0.55%
Avg -0.52% -0.13% 0.49% 0.11% -0.67% -0.59%
 
SPX summary for Presidential Year 2 1954 - 2006
Avg -0.32% -0.09% 0.08% -0.19% -0.47% -0.96%
Win% 36% 50% 64% 43% 31% 50%
 
SPX summary for all years 1953 - 2009
Avg -0.22% 0.13% 0.06% -0.02% -0.15% -0.18%
Win% 38% 55% 55% 54% 43% 54%


Money supply (M2)

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

M2 Money Supply


Conclusion

New lows diminished last week, but, after rising 6% - 8% in a week and a half the market is overbought.

I expect the major averages to be lower on Friday June 25 than they were on Friday June 18.

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 examines the claim that the stock market is a "great long-term investment". For a look at Professor Robert Shiller's (Yale) long-term, inflation-adjusted S&P500 go to www.alphaim.net where you can 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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