Technical Market Report for September 11, 2010

By: Mike Burk | Sat, Sep 11, 2010
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The good news is:
• New lows remained at non threatening levels.


The negatives

Friday was an up day for all of the major indices, but new highs declined on both the NYSE and NASDAQ. On the NASDAQ new lows hit their high for the week on Friday.

The chart below is a up date of one I show often covering the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio) in red. Dashed vertical lines have been drawn on the 1st trading day of each month. Dashed horizontal lines have been drawn at 10% levels of the indicator; the line is solid at the neutral 50% level.

Although Friday was an up day for the indices, new lows exceeded new highs on the NASDAQ and OTC HL Ratio turned down.

NASDAQ HL Ratio

Volume everywhere continues to deteriorate; on the NYSE it hit a 9 year low.

The charts below cover different periods showing the S&P 500 (SPX) in red and a 5% trend (39 day EMA) of NYSE total volume (NY Tot Vol T) in black.

The chart below shows NY Tot Vol T hitting a low for the past 6 months.

NYSE Total Volume 6-Months

The next chart is similar to the one above except it covers the past 10 years.

NYSE Total Volume - 10-Years

The secondaries lead both up and down and last week the blue chips were up and the secondaries were down.


The positives

New lows remained at non threatening levels.

On the NASDQ new lows picked up a little from the previous week hitting a high of 43 on Friday. A rule of thumb is NASDAQ new lows are not an issue until they exceed 70.

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 black. OTC NL has been plotted on an inverted Y axis so decreasing new lows moves the indicator upward (up is good).

OTC NL moved sharply upward last week.

NASDAQ New Lows

The next chart is similar to the first chart at the top of the page except is shows the SPX in red and NY HL Ratio in black. NY HL Ratio has been calculated from NYSE data.

Although I have issues with NYSE data, this indicator at a current value of 95% is so high it suggests there should be no big problems in the near future.

NYSE HL Ratio

Advance decline lines (ADL) are a running total of declining issues subtracted from advancing issues.

The chart below covers the past 6 months showing the SPX in red and the NYSE ADL in blue. The NYSE ADL hit an all time high on Friday.

NYSE Advance/Decline


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of September 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 3rd Friday of September 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.

Average returns by all measures have been positive.

Report for the week before the 3rd Friday of September.
The number following the year is the position in the presidential cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.08% 1.31% 0.15% 0.91% 0.63% 2.93%
 
1970-2 0.09% -0.13% -1.14% 0.20% 1.15% 0.18%
1974-2 1.02% 0.84% 0.69% 2.41% 0.64% 5.60%
1978-2 0.43% 0.21% 0.01% -0.65% -0.71% -0.72%
1982-2 0.24% 0.93% 0.93% 0.26% -0.10% 2.25%
1986-2 -0.27% -0.63% 0.94% 0.49% 0.24% 0.77%
Avg 0.30% 0.24% 0.28% 0.54% 0.24% 1.62%
 
1990-2 -0.08% -0.51% -0.14% -1.95% -0.60% -3.28%
1994-2 -0.49% 0.77% 0.36% 1.31% -0.10% 1.85%
1998-2 1.47% 0.72% 0.73% -2.58% 1.06% 1.40%
2002-2 -1.20% -1.25% -0.62% -2.85% 0.38% -5.54%
2006-2 0.34% 1.96% 0.53% 0.05% 0.31% 3.19%
Avg 0.01% 0.34% 0.17% -1.21% 0.21% -0.48%
 
OTC summary for Presidential Year 2 1966 - 2006
Avg 0.13% 0.38% 0.22% -0.22% 0.26% 0.78%
Win% 55% 64% 73% 64% 64% 73%
 
OTC summary for all years 1963 - 2009
Avg -0.01% 0.15% -0.04% 0.17% 0.37% 0.65%
Win% 45% 53% 57% 62% 72% 62%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.91% 0.51% 0.03% 0.54% 0.79% 2.79%
1958-2 0.89% 0.80% -0.04% -0.51% 0.65% 1.79%
1962-2 0.32% -0.08% -0.14% -0.70% -1.45% -2.05%
1966-2 2.12% 0.53% 1.03% 1.20% -0.11% 4.77%
 
1970-2 -0.55% -0.87% 0.53% 0.61% 0.40% 0.13%
1974-2 1.63% 1.69% 0.50% 3.50% 0.07% 7.39%
1978-2 0.18% 0.01% -0.61% -1.17% -0.93% -2.52%
1982-2 1.05% 0.70% 0.97% -0.42% -0.99% 1.32%
1986-2 0.55% -0.09% -0.02% 0.27% -0.04% 0.67%
Avg 0.57% 0.29% 0.28% 0.56% -0.30% 1.40%
 
1990-2 0.30% 0.26% -0.63% -1.62% -0.05% -1.74%
1994-2 -0.42% 0.28% 0.27% 1.28% -0.76% 0.65%
1998-2 2.04% 0.78% 0.75% -2.54% 0.12% 1.14%
2002-2 0.14% -1.97% -0.46% -3.01% 0.25% -5.05%
2006-2 0.05% 1.04% 0.38% -0.14% 0.27% 1.61%
Avg 0.42% 0.08% 0.06% -1.20% -0.04% -0.68%
 
SPX summary for Presidential Year 2 1954 - 2006
Avg 0.66% 0.26% 0.18% -0.19% -0.13% 0.78%
Win% 86% 71% 57% 43% 50% 71%
 
SPX summary for all years 1953 - 2009
Avg 0.05% 0.10% 0.04% 0.14% 0.19% 0.53%
Win% 51% 54% 61% 58% 60% 61%


Money Supply (M2)

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

M2 Money Supply


Conclusion

There is little to recommend the current market. It is a little overbought and the secondaries have been underperforming the blue chips.

I expect the major averages to be lower on Friday September 17 than they were on Friday September 10.

Last week the blue chips were up a little while the secondaries were down a little so I am calling last week's positive forecast a tie.

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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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