Technical Market Report for June 2, 2012

By: Mike Burk | Sat, Jun 2, 2012
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The good news is:
• Friday's low was unconfirmed by many of the breadth indicators.


The negatives

It is the counter trend days that give clues about possible trend changes and last week there was only one.

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 confirming Friday's low.

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 also continued to decline confirming Friday's low, but, the rate of decline has diminished.


The positives

New lows increased last week but, on the NASDAQ, remained below their May highs. On the NYSE, new lows hit their highest level since last November.

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% levels of the indicator; the line is solid at the neutral 50% level.

OTC HL Ratio turned downward last week, but remains above its mid May low. It is well below the neutral level and falling.

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 is slightly more positive than OTC HL Ratio.

The next chart shows the OTC in blue and a 10% trend of NASDAQ new lows (OTC NL) in orange. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

OTC NL turned downward last week, but remains above its mid May lows.


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of June during the 4th year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the 5 trading days prior to the 2nd Friday 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 1953 - 2011. There are summaries for both the 4th 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 mixed, slightly negative over all years and slightly positive during the 4th year of the Presidential Cycle.

Report for the week before the 2nd Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 -0.03% -0.46% 0.44% 0.41% 0.13% 0.49%
1968-4 0.38% -0.71% 0.00% 0.21% -0.32% -0.44%
 
1972-4 -0.58% -0.56% -0.76% 0.05% -0.38% -2.23%
1976-4 -0.60% -0.11% -0.20% 0.41% 0.46% -0.04%
1980-4 0.21% 0.75% 0.69% 0.06% 0.82% 2.54%
1984-4 1.21% -0.13% 0.44% 0.17% 0.19% 1.88%
1988-4 0.77% -0.11% 1.08% 0.31% 0.43% 2.47%
Avg 0.20% -0.03% 0.25% 0.20% 0.30% 0.92%
 
1992-4 -0.58% -1.41% -0.71% -0.36% 0.32% -2.74%
1996-4 0.02% 0.07% 0.37% -0.79% -1.01% -1.35%
2000-4 0.22% -1.71% 2.21% -0.36% 1.29% 1.65%
2004-4 -1.49% 1.30% 0.13% -0.73% 0.15% -0.64%
2008-4 -0.61% -0.43% -2.24% 0.43% 2.09% -0.76%
Avg -0.49% -0.44% -0.05% -0.36% 0.57% -0.77%
 
OTC summary for Presidential Year 4 1964 - 2008
Avg -0.09% -0.29% 0.13% -0.02% 0.35% 0.07%
Win% 50% 25% 64% 67% 75% 42%
 
OTC summary for all years 1963 - 2011
Avg -0.24% -0.19% -0.02% 0.06% 0.10% -0.29%
Win% 47% 29% 52% 67% 61% 39%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 0.59% 0.02% -0.50% 0.79% -1.85% -0.95%
1960-4 1.17% 0.95% 0.80% 0.19% -0.05% 3.06%
1964-4 -0.48% 0.64% 0.38% 0.37% -0.16% 0.74%
1968-4 0.14% 0.25% 0.00% -0.40% -0.12% -0.14%
 
1972-4 -0.83% -0.56% -0.52% -0.34% -0.39% -2.64%
1976-4 -0.52% 0.17% -0.06% 0.83% 1.37% 1.78%
1980-4 0.45% 0.84% 1.19% -0.43% 0.25% 2.29%
1984-4 0.72% -0.45% 0.89% -0.06% 0.16% 1.26%
1988-4 0.23% -0.70% 2.39% -0.49% 0.39% 1.82%
Avg 0.01% -0.14% 0.78% -0.10% 0.36% 0.90%
 
1992-4 -0.03% -0.80% -0.69% 0.44% 0.17% -0.90%
1996-4 -0.17% -0.18% -0.29% -0.17% -0.31% -1.11%
2000-4 -0.66% -0.67% 0.93% -0.66% -0.32% -1.37%
2004-4 -0.98% 0.60% 0.14% -0.13% 0.26% -0.12%
2008-4 0.08% -0.24% -1.69% 0.33% 1.50% -0.02%
Avg -0.35% -0.26% -0.32% -0.04% 0.26% -0.70%
 
SPX summary for Presidential Year 4 1956 - 2008
Avg -0.02% -0.01% 0.23% 0.02% 0.06% 0.26%
Win% 50% 50% 54% 43% 50% 43%
 
SPX summary for all years 1953 - 2011
Avg -0.24% -0.06% 0.00% 0.08% 0.16% -0.05%
Win% 44% 42% 47% 59% 61% 46%


Money supply (M2)

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


Conclusion

The end of month - beginning of month seasonal rally did not materialize. The bottom indicators, new lows and down side volume, did not confirm Friday's low, but, could easily catch up in the next few days. Seasonally, beyond the next 2 - 3 days June has not been strong. There should be a relief rally soon.

I expect the major averages to be higher on Friday June 8 than they were on Friday June 1.

Last weeks positive forecast was a miss.

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Good Luck,

YTD W 6 /L10/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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