Technical Market Report for May 26, 2012

By: Mike Burk | Sat, May 26, 2012
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The good news is:
• Seasonally, next week has been one of the strongest weeks of the year.


The negatives

All of the major indices were up last week led by their growth components, but, the rally failed to generate any new 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 continued to fall last week in spite of the rally in prices.

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.

NY NH is also continued to decline.


The positives

New lows declined last week giving some life to the bottom indicators

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 horizontal lines have been drawn at 10% levels of the indicator; the line is solid at the neutral 50% level.

OTC HL Ratio turned upward, but remains well below the neutral level.

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

NY HL Ratio moved up sharply at the end of last week.


Seasonality

Next week includes the last 3 trading days of May and 1st trading day of June during the 4th year of the Presidential Cycle.

The tables below show the return on a percentage basis for the last 3 trading days of May and 1st trading day of June during the 4th year of the Presidential Cycle.

OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1928 - 2011. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Average returns for the coming week have been positive by all measures.

Last 3 days of May and first day of June.
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 4
  Day3 Day2 Day1 Day1 Totals
1964-4 -0.28% 2 0.33% 3 0.15% 4 -0.08% 1 0.13%
1968-4 0.29% 2 0.46% 3 0.69% 5 0.87% 1 2.32%
 
1972-4 0.11% 5 -0.37% 2 -0.69% 3 0.45% 4 -0.50%
1976-4 0.33% 3 -0.36% 4 0.30% 5 -0.26% 2 0.00%
1980-4 0.40% 3 -0.40% 4 0.24% 5 -0.19% 1 0.05%
1984-4 -1.11% 2 -0.29% 3 0.38% 4 1.32% 5 0.30%
1988-4 0.43% 4 -0.17% 5 1.00% 2 1.21% 3 2.47%
Avg 0.03% -0.32% 0.25% 0.51% 0.46%
 
1992-4 0.30% 3 0.54% 4 0.83% 5 0.52% 1 2.19%
1996-4 -0.87% 3 0.64% 4 0.80% 5 -0.38% 1 0.20%
2000-4 -0.01% 5 7.94% 2 -1.69% 3 5.34% 4 11.57%
2004-4 0.59% 3 0.42% 4 0.11% 5 0.20% 2 1.32%
2008-4 0.22% 3 0.87% 4 0.57% 5 -1.23% 1 0.43%
Avg 0.05% 2.08% 0.12% 0.89% 3.14%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.03% 0.80% 0.23% 0.65% 1.71%
% Winners 67% 58% 83% 58% 92%
MDD 5/31/2000 1.69% -- 5/30/1984 1.40% -- 6/2/2008 1.23%
 
OTC summary for all years 1963 - 2011
Averages 0.03% 0.27% 0.29% 0.21% 0.80%
% Winners 61% 59% 71% 58% 69%
MDD 5/30/2001 7.40% -- 6/3/2002 5.42% -- 6/1/1973 2.73%
 
SPX Presidential Year 4
  Day3 Day2 Day1 Day1 Totals
1928-4 -1.66% 1 1.28% 2 0.91% 4 0.35% 5 0.88%
 
1932-4 -5.48% 5 0.41% 6 -7.84% 2 -1.57% 3 -14.47%
1936-4 -0.21% 3 -0.83% 4 0.70% 5 -0.07% 1 -0.41%
1940-4 -2.03% 2 0.65% 3 0.22% 5 -0.43% 6 -1.59%
1944-4 0.25% 6 0.16% 1 0.65% 3 -0.32% 4 0.74%
1948-4 0.91% 3 0.00% 4 0.06% 5 0.30% 2 1.27%
Avg -1.31% 0.08% -1.24% -0.42% -2.89%
 
1952-4 -0.25% 2 -0.17% 3 0.08% 4 -0.25% 1 -0.59%
1956-4 -1.17% 1 2.29% 2 0.20% 4 0.84% 5 2.17%
1960-4 0.07% 4 0.05% 5 0.16% 2 0.11% 3 0.39%
1964-4 -0.21% 2 -0.16% 3 0.14% 4 -0.32% 1 -0.56%
1968-4 0.65% 2 0.31% 3 0.78% 5 1.33% 1 3.06%
Avg -0.18% 0.46% 0.27% 0.34% 0.90%
 
1972-4 0.18% 5 -0.28% 2 -0.74% 3 0.15% 4 -0.70%
1976-4 -0.15% 3 0.04% 4 0.80% 5 -0.33% 2 0.37%
1980-4 0.59% 3 -1.60% 4 0.88% 5 -0.43% 1 -0.56%
1984-4 -0.88% 2 0.04% 3 0.13% 4 1.79% 5 1.08%
1988-4 0.34% 4 -0.48% 5 3.45% 2 1.73% 3 5.04%
Avg 0.02% -0.45% 0.90% 0.58% 1.05%
 
1992-4 0.18% 3 1.11% 4 -0.33% 5 0.47% 1 1.43%
1996-4 -0.64% 3 0.57% 4 -0.38% 5 -0.22% 1 -0.67%
2000-4 -0.25% 5 3.23% 2 -0.13% 3 1.99% 4 4.83%
2004-4 0.17% 3 0.57% 4 -0.05% 5 0.05% 2 0.73%
2008-4 0.40% 3 0.53% 4 0.15% 5 -1.05% 1 0.03%
Avg -0.03% 1.20% -0.15% 0.25% 1.27%
 
SPX summary for Presidential Year 4 1928 - 2008
Averages -0.44% 0.37% -0.01% 0.20% 0.12%
% Winners 48% 67% 71% 52% 62%
MDD 6/1/1932 13.89% -- 5/28/1940 2.03% -- 5/28/1928 1.66%
 
SPX summary for all years 1928 - 2011
Averages -0.06% 0.24% 0.05% -0.01% 0.22%
% Winners 49% 61% 59% 50% 63%
MDD 6/1/1932 13.89% -- 6/1/1931 7.53% -- 5/28/1962 6.68%


Money supply (M2)

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


June

Since 1963, over all years, the OTC in June has been up 53% of the time with an average gain of 0.2%. During the 4th year of the Presidential Cycle June has been up 67% time with an average gain of 1.0%. The average return was helped by a 10.7% gain in 2000. The best June ever for the OTC was 1999 (+11.3%), the worst 2008 (-8.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in June over all years since 1963 while the black line shows the average during the 4th year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 52% of the time in June with an average gain of 0.8%. During the 4th year of the Presidential Cycle the SPX has been up 70% of the time with an average gain of 1.2%. The best June for the SPX was 1938 (+20.8%) the worst 1930 (-16.1%).

The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in June in red and the performance during the 4th year of the Presidential Cycle in black.

Since 1979 the Russell 2000 (R2K) has been up 58% of the time in June with an average gain of 0.1%. During the 4th year of the Presidential Cycle the R2K has been up 63% of the time with an average gain of 0.4%. The best June for the R2K, 1988 (+5.8%), the worst 2008 (-6.9%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in June in green and the performance during the 4th year of the Presidential Cycle in black.

Since 1885 the DJIA has been up 46% of the time in June with an average gain of 0.1%. During the 4th year of the Presidential Cycle the DJIA has been up 58% of the time in June with an average loss of -0.1%. The best June for the DJIA 1938 (+21.0%), the worst 1930 (-17.5%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in June in grey and the performance during the 4th year of the Presidential Cycle in black.


Conclusion

For the past 50 years or so all of the markets gains in June have been made during the 1st week.

I expect the major averages to be higher on Friday June 1 than they were on Friday May 25.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 6 /L9/T 6

 


 

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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