Technical Market Report for December 3, 2011

By: Mike Burk | Sat, Dec 3, 2011
Print Email

The good news is:
•The market had a good week last week.


The negatives

Depending on the index the market was up 7% - 10% last week.

A move of that magnitude should have been accompanied by a spike in volume, it was not.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 5% trend (39 day EMA) of NASDAQ total volume (OTC Tot Vol) in orange. Dashed vertical lines have been drawn on the 1st trading day of each month.

Volume is a measure of interest and a weekly move of 7% - 10% failed to generate any interest.

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

The pattern is similar to the chart above.


The positives

New highs increased and new lows decreased last week. The numbers could have been better, but, at least, they were in the right direction.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

The value as of Friday of OTC NH is 28 so it will require more than 28 new highs to keep OTC NH moving upward, this is critical.

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

NY NH looks good; unfortunately most of the issues making new highs last week were fixed income related. The current value of NY NH is 62 so it will take more than 62 NYSE new highs to keep NY NH moving upward.

The next chart shows the NYSE composite (!NYA) in red and NH has been calculated, on a closing basis, from only equity issues on the NYSE over 15 trading days.

NH is usually more responsive than NY NH in the chart above. Last week it was noticeably less responsive.


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday in December 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 2nd Friday of December 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.

Average returns for the coming week have been modestly positive by all measures and a little stronger during the 3rd year of the Presidential Cycle than other years.

Report for the week before the 2nd Friday of December.
The number following the year is the position in the presidential cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.25% 0.14% 0.26% 0.25% -0.37% 0.03%
1967-3 0.87% 0.99% 0.47% 0.37% 0.09% 2.79%
 
1971-3 -0.32% 0.32% 0.42% 0.24% 0.78% 1.44%
1975-3 0.27% -0.53% 0.98% -0.23% -0.23% 0.26%
1979-3 0.33% -0.09% 0.46% 0.31% 0.71% 1.71%
1983-3 -0.50% -0.16% 0.04% -0.56% -0.02% -1.20%
1987-3 0.63% 1.08% 1.34% -0.38% 0.59% 3.26%
Avg 0.08% 0.12% 0.65% -0.12% 0.37% 1.09%
 
1991-3 -0.18% -0.21% -0.48% 0.82% 0.91% 0.86%
1995-3 1.37% -0.36% -0.39% -0.80% 0.87% 0.69%
1999-3 0.72% 1.15% -0.02% 0.23% 0.72% 2.80%
2003-3 0.57% -2.08% -0.19% 1.98% 0.34% 0.62%
2007-3 0.47% -2.45% 0.71% -0.10% -1.23% -2.59%
Avg 0.59% -0.79% -0.08% 0.43% 0.32% 0.48%
 
OTC summary for Presidential Year 3 1963 - 2007
Avg 0.33% -0.18% 0.30% 0.18% 0.26% 0.89%
Win% 67% 42% 67% 58% 67% 83%
 
OTC summary for all years 1963 - 2010
Avg 0.14% 0.03% 0.02% -0.35% 0.24% 0.09%
Win% 60% 50% 55% 48% 56% 52%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.57% 0.00% -0.33% 0.59% 0.15% 0.99%
1959-3 0.19% 0.64% -0.62% 0.08% -0.24% 0.06%
1963-3 -0.05% 0.04% -0.12% 0.01% 0.20% 0.08%
1967-3 0.63% 0.14% 0.43% -0.12% -0.12% 0.97%
 
1971-3 -0.57% 0.37% 0.05% 0.04% 0.75% 0.65%
1975-3 0.29% 0.26% 0.89% -0.32% 0.03% 1.16%
1979-3 0.14% -0.17% 0.03% 0.14% 1.16% 1.30%
1983-3 0.20% -0.18% 0.27% -0.43% -0.07% -0.21%
1987-3 2.16% 2.69% 1.69% -2.23% 0.75% 5.07%
Avg 0.44% 0.60% 0.59% -0.56% 0.53% 1.59%
 
1991-3 -0.22% -0.10% -0.05% 1.02% 0.77% 1.41%
1995-3 1.10% 0.65% 0.40% -0.65% 0.21% 1.73%
1999-3 -0.69% -1.00% -0.38% 0.30% 0.64% -1.13%
2003-3 0.73% -0.85% -0.11% 1.15% 0.27% 1.20%
2007-3 0.75% -2.53% 0.61% 0.12% -1.37% -2.42%
Avg 0.34% -0.76% 0.09% 0.39% 0.10% 0.16%
 
SPX summary for Presidential Year 3 1955 - 2007
Avg 0.37% 0.00% 0.20% -0.02% 0.22% 0.78%
Win% 71% 54% 57% 64% 71% 79%
 
SPX summary for all years 1953 - 2010
Avg 0.18% 0.00% 0.04% -0.27% 0.21% 0.15%
Win% 57% 46% 53% 41% 67% 55%


Money supply (M2)

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


Conclusion

Last week I pointed out how currency movements have recently had an extraordinary correlation with the equity markets. On cue central banks announced a plan to support the Euro and trash the dollar and the markets soared. Fundamentally the Euro appears to have some severe problems which complicate the Fed's efforts to destroy the dollar in the race to the bottom. But, for now, the Fed is winning.

I expect the major averages to be higher on Friday December 9 than they were on Friday December 2.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

In his latest newsletter (In The Zone) Jerry Minton looks at the history of the annual "power zone"... no bear market in thirty years. To read it and subscribe to this free newsletter go to www.alphaim.net.

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.

Copyright © 2003-2017 Mike Burk

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com