Technical Market Report for April 9, 2011

By: Mike Burk | Sun, Apr 10, 2011
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The good news is:
• The NYSE advance - decline hit an all time high on Wednesday.


The negatives

New highs have been progressively declining over the past year.

The chart below covers the past 6 months 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 well off its mid February and mid November highs while the SPX is only slightly off its mid February high.

The next chart is similar to the one above except it covers the past 1.5 years.

The recent peak of NY NH is well below the level reached early last year.

The levels of NY NH are not critical yet, but, the pattern shows narrowing leadership.


The positives

New lows remained benign last week while new highs declined sharply.

The chart below covers 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 and dashed horizontal lines have been drawn at 10% increments for the indicator. The horizontal line is solid at the neutral 50% level.

The value of the indicator fell from a very comfortable 85% to a slightly less comfortable 78% on Friday.

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

NY HL Ratio has a more positive bias than OTC HL Ratio. NY HL ratio rose from 93% a week ago to 95% last Friday.

The weakness at the end of last week appears to be no more than a typical pull back in a bull market.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday in April during the 3rd 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 in April during the 3rd year of the Presidential Cycle. OTC data covers the period from 1963 - 2010 and SPX data from 1953 - 2010. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Average returns for the coming week have been strong over all periods and stronger during the 3rd year of the Presidential Cycle than other years.

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

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 0.56% 0.31% 0.34% 0.30% 0.30% 1.81%
1967-3 0.40% 0.57% 1.23% 0.31% 0.49% 3.01%
 
1971-3 0.18% -0.57% -0.01% 0.43% 0.64% 0.67%
1975-3 1.34% 0.23% 0.63% 0.33% -0.23% 2.30%
1979-3 0.15% 0.31% 0.36% -0.10% -0.20% 0.52%
1983-3 0.44% -0.34% 1.05% 0.71% 0.60% 2.45%
1987-3 -0.41% 0.20% -0.10% -0.17% -1.15% -1.64%
Avg 0.34% -0.03% 0.39% 0.24% -0.07% 0.86%
 
1991-3 -0.16% 1.18% 0.90% -0.92% -1.07% -0.06%
1995-3 0.66% 0.29% 0.68% 0.48% 0.36% 2.47%
1999-3 -5.57% 2.73% 3.26% 2.92% 1.16% 4.50%
2003-3 -0.08% 1.89% 1.02% -0.61% -1.56% 0.67%
2007-3 -0.11% 0.03% 0.92% 0.26% 0.11% 1.22%
Avg -1.05% 1.23% 1.36% 0.43% -0.20% 1.76%
 
OTC summary for Presidential Year 3 1963 - 2007
Avg -0.22% 0.57% 0.86% 0.33% -0.05% 1.49%
Win% 58% 83% 83% 67% 58% 83%
 
OTC summary for all years 1963 - 2010
Avg -0.39% 0.31% 0.26% 0.28% 0.15% 0.61%
Win% 47% 57% 71% 65% 63% 71%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.82% -0.13% 0.16% 0.10% -0.81% 0.14%
1959-3 0.37% 0.50% 0.44% 0.83% 0.85% 2.99%
1963-3 0.10% 0.33% 0.27% 0.06% -0.09% 0.68%
1967-3 0.71% 0.87% 0.09% 0.18% 0.21% 2.05%
 
1971-3 0.50% -0.38% -0.24% 0.19% 0.47% 0.54%
1975-3 1.69% 0.82% 0.35% 0.75% -1.09% 2.51%
1979-3 0.34% 0.62% 0.29% -0.48% -0.21% 0.57%
1983-3 0.62% -0.64% 1.26% -0.41% 0.23% 1.06%
1987-3 -0.29% 2.44% -2.01% -0.13% -1.85% -1.83%
Avg 0.57% 0.57% -0.07% -0.01% -0.49% 0.57%
 
1991-3 0.21% 1.69% 0.73% -0.51% -1.10% 1.02%
1995-3 0.87% -0.14% 0.10% 0.17% 0.23% 1.22%
1999-3 -2.24% 1.30% 2.29% 1.70% -0.14% 2.91%
2003-3 -0.18% 2.17% 0.84% -0.83% -1.38% 0.62%
2007-3 -0.23% -0.04% 1.01% -0.08% -0.01% 0.66%
Avg -0.31% 0.99% 0.99% 0.09% -0.48% 1.29%
 
SPX summary for Presidential Year 3 1955 - 2007
Avg 0.24% 0.67% 0.40% 0.11% -0.33% 1.08%
Win% 71% 64% 86% 57% 36% 93%
 
SPX summary for all years 1953 - 2010
Avg -0.12% 0.30% 0.08% 0.12% -0.05% 0.33%
Win% 48% 53% 58% 62% 48% 67%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 turned back down last week.

M2


Conclusion

There was a modest pull back at the end of last week which could last another day and set the market up for a resumption of the rally.

I expect the major averages to be higher on Friday April 15 than they were on Friday April 8.

Last the Dow Jones Industrial Average was up slightly last week while the other major indices were down slightly last week, so I am calling last weeks 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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