Technical Market Report for April 23, 2011

By: Mike Burk | Sat, Apr 23, 2011
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The good news is:
• The Dow Jones Industrial Average (DJIA) closed at a multiyear high on Thursday.


The negatives

Following a decline on Monday the market rallied for 3 days on modest volume. The DJIA closed at a multi year high and most of the major indices closed within 1% of their recent multi year highs. Indicators derived from diverse calculations of varied data are all a long way from confirming these highs.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH turned upward last week, but, with the index only 0.5% from its previous high, OTC NH is far from its previous high and showing a pattern of progressively lower highs.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH has been calculated from NYSE data. The patterns are similar.

The next chart covers the past 6 months showing the OTC in blue and a 5% trend (39 day EMA) of NASDAQ volume of advancing issues (OTC UV) in green. Each higher high in the OTC has been accompanied by lower levels of OTC UV. Typically higher highs in prices generate enthusiasm measured by volume. Enthusiasm has been falling short.

The next chart is similar to the one above except is shows the SPX in red and NY UV has been calculated from NYSE data. The pattern is similar, but a little worse.


The positives

Nothing really bad happens with out an increase in new lows and new lows have been, and remain, at non threatening levels for months.

The chart below covers the past 6 months showing the 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 horizontal lines have been drawn at 10% increments for the indicator. The horizontal line is solid at the neutral 50% level.

OTC HL Ratio rose to a comfortable 76% last week, but remains lower than it was a couple weeks ago when the OTC was lower. A non confirmation.

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.

The pattern is similar to the chart above.


Seasonality

Next week includes the last 5 trading days of April during the 3rd year of the Presidential Cycle.

The tables below show the return on a percentage basis for the last 5 trading days of April during the 3rd year of the Presidential Cycle. OTC data covers the period from 1963 - 2010 and SPX data from 1928 - 2010. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Average returns for the last 5 days of April have been modest. Over all years the SPX has averaged a slightly negative return, but, by all other measures returns have been slightly positive.

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 3
  Day5 Day4 Day3 Day2 Day1 Totals
1963-3 0.34% 3 0.30% 4 0.30% 5 0.24% 1 0.06% 2 1.25%
1967-3 0.56% 1 -0.19% 2 0.10% 3 0.28% 4 0.83% 5 1.57%
 
1971-3 0.40% 1 0.50% 2 0.61% 3 0.08% 4 -0.14% 5 1.45%
1975-3 -0.22% 4 0.73% 5 -0.46% 1 -0.59% 2 0.93% 3 0.39%
1979-3 0.31% 2 0.36% 3 -0.10% 4 -0.20% 5 -0.41% 1 -0.04%
1983-3 -0.68% 1 0.53% 2 0.28% 3 0.66% 4 0.76% 5 1.56%
1987-3 -1.15% 5 -0.71% 1 0.55% 2 0.55% 3 0.87% 4 0.11%
Avg -0.27% 0.28% 0.18% 0.10% 0.40% 0.69%
 
1991-3 0.48% 3 -0.49% 4 -0.28% 5 -1.39% 1 -0.62% 2 -2.30%
1995-3 0.66% 1 0.29% 2 0.68% 3 0.48% 4 0.36% 5 2.47%
1999-3 2.37% 1 -1.87% 2 -2.00% 3 -0.86% 4 0.57% 5 -1.79%
2003-3 -0.61% 4 -1.56% 5 1.93% 1 0.62% 2 -0.48% 3 -0.09%
2007-3 0.03% 2 0.92% 3 0.26% 4 0.11% 5 -1.26% 1 0.07%
Avg 0.59% -0.54% 0.12% -0.21% -0.28% -0.33%
 
OTC summary for Presidential Year 3 1963 - 2007
Averages 0.21% -0.10% 0.16% 0.00% 0.12% 0.39%
% Winners 67% 58% 67% 67% 58% 67%
MDD 4/29/1999 4.66% -- 4/30/1991 2.75% -- 4/25/2003 2.16%
 
OTC summary for all years 1963 - 2010
Averages -0.13% -0.05% -0.02% 0.19% 0.25% 0.22%
% Winners 54% 46% 71% 65% 67% 58%
MDD 4/29/1970 7.72% -- 4/30/2004 6.32% -- 4/29/1999 4.66
 
SPX Presidential Year 3
  Day5 Day4 Day3 Day2 Day1 Totals
1931-3 -2.22% 6 -1.27% 1 -0.61% 2 -2.04% 3 5.01% 4 -1.14%
1935-3 1.29% 4 -0.42% 5 -0.64% 6 0.54% 1 -1.17% 2 -0.41%
1939-3 0.19% 2 1.02% 3 1.10% 4 -0.91% 5 -0.09% 6 1.31%
1943-3 0.00% 1 0.00% 2 0.00% 3 0.96% 4 0.00% 5 0.96%
1947-3 -0.69% 5 0.07% 6 -0.21% 1 0.21% 2 1.25% 3 0.63%
Avg -0.29% -0.12% -0.07% -0.25% 1.00% 0.27%
 
1951-3 0.05% 3 0.86% 4 1.04% 5 0.18% 6 0.00% 1 2.13%
1955-3 0.26% 1 0.52% 2 -0.52% 3 -1.13% 4 0.74% 5 -0.12%
1959-3 0.63% 5 0.31% 1 -0.38% 2 -0.40% 3 -0.17% 4 -0.01%
1963-3 0.27% 3 0.06% 4 -0.09% 5 -0.07% 1 0.22% 2 0.39%
1967-3 0.35% 1 0.53% 2 -0.10% 3 0.85% 4 0.21% 5 1.84%
Avg 0.31% 0.46% -0.01% -0.11% 0.20% 0.84%
 
1971-3 -0.11% 1 0.43% 2 0.36% 3 -0.13% 4 -0.65% 5 -0.09%
1975-3 -0.09% 4 0.67% 5 -0.45% 1 -0.68% 2 1.94% 3 1.39%
1979-3 0.62% 2 0.29% 3 -0.48% 4 -0.21% 5 -0.04% 1 0.19%
1983-3 -1.00% 1 1.89% 2 -0.23% 3 0.94% 4 0.90% 5 2.49%
1987-3 -1.85% 5 0.11% 1 0.24% 2 0.73% 3 1.33% 4 0.56%
Avg -0.49% 0.68% -0.11% 0.13% 0.70% 0.91%
 
1991-3 0.26% 3 -0.92% 4 -0.06% 5 -1.41% 1 0.45% 2 -1.68%
1995-3 0.87% 1 -0.14% 2 0.10% 3 0.17% 4 0.23% 5 1.22%
1999-3 0.24% 1 0.20% 2 -0.87% 3 -0.59% 4 -0.57% 5 -1.60%
2003-3 -0.83% 4 -1.38% 5 1.78% 1 0.33% 2 -0.10% 3 -0.20%
2007-3 -0.04% 2 1.01% 3 -0.08% 4 -0.01% 5 -0.78% 1 0.11%
Avg 0.10% -0.25% 0.17% -0.30% -0.16% -0.43%
 
SPX summary Presidential Year 3 1931 - 2007
Averages -0.09% 0.19% 0.00% -0.13% 0.44% 0.40%
% Winners 55% 70% 30% 45% 50% 60%
MDD 4/29/1931 6.02% -- 4/29/1991 2.38% -- 4/25/2003 2.20%
 
SPX summary for all years 1928 - 2010
Averages -0.21% 0.03% -0.12% -0.03% 0.27% -0.06%
% Winners 47% 57% 50% 49% 58% 55%
MDD 4/29/1932 7.02% -- 4/29/1936 6.82% -- 4/29/1931 6.02%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 was flat last week.

M2


Conclusion

Prices rallied last week, out running the indicators to the upside and leaving the market slightly overbought in the very short term. The indicators have not deteriorated enough to suggest a top, but, without any seasonal help, the market is likely to experience a few rough days early next week.

I expect the major averages to be lower on Friday April 29 than they were on Thursday April 21.

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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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