Technical Market Report for November 12, 2011

By: Mike Burk | Sat, Nov 12, 2011
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The good news is:
• There was no significant increase in new lows last week.


The negatives

The market has rallied about 15% off its early October low, but has failed to generate many new highs along the way.

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

In a strong market new highs would lead the way upward. That has not been the case this year.

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

The pattern is similar to the chart above.

Rallies without a significant expansion of new highs imply a narrowing of leadership. Not good.


The positives

The positives are the lack of extreme negatives.

The chart below covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio) in dark blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the neutral 50% level.

NY HL Ratio managed to hold above the neutral level last week.

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

OTC HL Ratio remained below the neutral level illustrating the current dichotomy with the secondaries underperforming the blue chips.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of November 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 of November during the 3rd year of the Presidential Cycle.

OTC data covers the period from 1963 - 2010 and SPX data covers the period from 1953 - 2010. There are summaries for both the 3rd 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.

Like last week, average returns for the coming week have been slightly positive over all years and slightly negative during the 3rd year of the Presidential Cycle.

Report for the week before the 3rd Friday of November.
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 0.48% 0.17% -0.06% 0.20% -0.45% 0.34%
1967-3 0.24% -0.10% -0.25% 0.67% 1.04% 1.59%
 
1971-3 -0.45% 0.26% -0.07% -0.19% -0.47% -0.93%
1975-3 0.15% -0.61% -0.95% -0.26% 0.09% -1.58%
1979-3 0.88% 0.07% 0.45% 0.84% 0.11% 2.34%
1983-3 0.86% -0.21% 0.37% 0.47% 0.01% 1.49%
1987-3 -0.19% -1.74% 0.46% -1.35% -0.46% -3.27%
Avg 0.25% -0.45% 0.05% -0.10% -0.15% -0.39%
 
1991-3 0.48% 0.90% 0.09% -0.24% -4.24% -3.01%
1995-3 -0.51% -1.69% 0.12% 0.25% 0.05% -1.78%
1999-3 -0.05% 2.29% -0.73% 2.39% 0.66% 4.56%
2003-3 -1.07% -1.46% 0.95% -0.93% 0.64% -1.88%
2007-3 -1.67% 3.46% -1.10% -0.98% 0.72% 0.44%
Avg -0.56% 0.70% -0.13% 0.10% -0.44% -0.33%
 
OTC summary for Presidential Year 3 1963 - 2007
Avg -0.07% 0.11% -0.06% 0.07% -0.19% -0.14%
Win% 50% 50% 50% 50% 67% 50%
 
OTC summary for all years 1963 - 2010
Avg -0.12% 0.09% -0.06% 0.05% 0.03% 0.00%
Win% 47% 52% 58% 56% 54% 56%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 2.59% -0.43% -0.65% -0.70% -0.11% 0.70%
1959-3 -1.11% 0.28% 1.08% -0.09% 0.05% 0.22%
1963-3 0.22% -0.39% 0.08% -0.46% -0.82% -1.38%
1967-3 -0.26% -0.63% 0.40% 0.92% 0.24% 0.67%
 
1971-3 -0.34% 0.98% 0.15% -0.78% -0.56% -0.55%
1975-3 0.54% -0.50% -1.12% -0.38% -0.12% -1.59%
1979-3 1.97% -0.55% 0.44% 0.72% -0.33% 2.25%
1983-3 0.17% -0.73% 0.44% 0.03% -0.63% -0.72%
1987-3 0.46% -1.51% 1.03% -2.24% 0.81% -1.45%
Avg 0.56% -0.46% 0.19% -0.53% -0.17% -0.41%
 
1991-3 0.06% 0.92% 0.17% -0.07% -3.66% -2.58%
1995-3 -0.07% -0.51% 0.79% 0.57% 0.46% 1.24%
1999-3 -0.12% 1.84% -0.66% 1.01% -0.21% 1.86%
2003-3 -0.64% -0.91% 0.80% -0.84% 0.16% -1.43%
2007-3 -1.00% 2.91% -0.71% -1.32% 0.52% 0.41%
Avg -0.35% 0.85% 0.08% -0.13% -0.55% -0.10%
 
SPX summary for Presidential Year 3 1955 - 2007
Avg 0.18% 0.06% 0.16% -0.26% -0.30% -0.17%
Win% 50% 36% 71% 36% 43% 50%
 
SPX summary for all years 1953 - 2010
Avg -0.01% 0.00% -0.01% -0.05% 0.12% 0.04%
Win% 46% 47% 64% 50% 61% 53%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth continued its sharp fall last week.


Conclusion

Looking at the weekly totals, the market appears to have followed the seasonal pattern pretty closely with the blue chips up a little and the secondaries down a little. The daily swings, on the other hand, set some records.

I expect the major averages to be lower on Friday November 18 than they were on Friday November 11.

Last week the blue chips were up a little and the secondaries were down a little, so I am calling last weeks negative 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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