Technical Market Report for June 30, 2012

By: Mike Burk | Sat, Jun 30, 2012
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The good news is:
• Most of the indices and indicators closed at or near their highs for the month.

Last Friday the dollar index had its sharpest 1 day decline since last October while the equity markets had their best day since last December. Unfortunately, the weak dollar policy trades short term gains for degraded purchasing power and ultimately a lower standard of living.


The negatives

Until Friday new lows were declining, but remained near threatening levels.

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 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). Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NL has been flat for the past week holding at a somewhat uncomfortable level.

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

NY NL has been stronger than OTC NL.


The positives

New highs jumped on Friday to the highest level since late April on the NASDAQ and early February on the NYSE.

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

After moving pretty steadily upward for the past month OTC NH finished at its high for the month.

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

NY NH also closed at its high for the month.


Seasonality

Next week includes the first 4 trading days of July during the 4th year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the first 5 trading days of July 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 mixed the OTC has been weak while the SPX, which covers a much longer period, has been strong. The OTC has only been up once for the week in the past 5 Presidential Cycles.

Report for the first 4 days of July.
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
  Day1 Day2 Day3 Day4 Totals
1964-4 0.07% 3 0.62% 4 0.20% 1 0.10% 2 1.00%
1968-4 0.12% 1 0.36% 2 0.46% 3 0.67% 1 1.61%
 
1972-4 0.39% 1 0.53% 3 0.44% 4 -0.27% 5 1.09%
1976-4 -0.04% 4 0.66% 5 -0.29% 2 -0.02% 3 0.31%
1980-4 0.25% 2 0.64% 3 1.06% 4 1.72% 1 3.66%
1984-4 -0.73% 1 0.16% 2 -0.19% 4 -0.47% 5 -1.23%
1988-4 0.01% 5 0.36% 2 -0.17% 3 -0.01% 4 0.20%
Avg -0.02% 0.47% 0.17% 0.19% 0.81%
 
1992-4 0.96% 3 -0.99% 4 -0.03% 1 -1.02% 2 -1.09%
1996-4 1.05% 1 -0.52% 2 -0.81% 3 -1.96% 5 -2.24%
2000-4 0.65% 1 -3.23% 3 2.52% 4 1.58% 5 1.53%
2004-4 -1.57% 4 -0.44% 5 -2.15% 2 0.13% 3 -4.03%
2008-4 0.52% 2 -2.32% 3 -0.27% 4 -0.09% 1 -2.16%
Avg 0.32% -1.50% -0.15% -0.27% -1.60%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.14% -0.35% 0.06% 0.03% -0.11%
% Winners 75% 58% 42% 42% 58%
MDD 7/6/2004 4.12% -- 7/5/1996 3.26% -- 7/5/2000 3.23%
 
OTC summary for all years 1963 - 2011
Averages 0.09% -0.24% 0.02% 0.16% 0.02%
% Winners 59% 51% 49% 53% 57%
MDD 7/6/2001 7.24% -- 7/2/2002 7.20% -- 7/7/2009 5.39%
 
SPX Presidential Year 4
  Day1 Day2 Day3 Day4 Totals
1928-4 -1.09% 1 1.63% 2 0.98% 4 -0.46% 5 1.06%
 
1932-4 3.84% 5 -2.17% 2 2.22% 3 -3.26% 4 0.62%
1936-4 0.40% 3 -0.13% 4 0.94% 5 -0.53% 1 0.68%
1940-4 -1.10% 1 -0.20% 2 0.30% 3 0.61% 5 -0.39%
1944-4 0.08% 6 0.92% 1 0.53% 3 -0.38% 4 1.16%
1948-4 -0.24% 4 0.90% 5 0.00% 2 -0.36% 3 0.30%
Avg 0.60% -0.14% 0.80% -0.78% 0.47%
 
1952-4 0.64% 2 -0.24% 3 -0.04% 4 -0.32% 1 0.04%
1956-4 -0.09% 1 0.83% 2 1.01% 4 0.50% 5 2.26%
1960-4 0.25% 5 -0.07% 2 -0.14% 3 0.53% 4 0.56%
1964-4 0.71% 3 0.40% 4 0.46% 1 0.17% 2 1.74%
1968-4 -0.18% 1 0.34% 2 1.17% 3 1.02% 1 2.36%
Avg 0.27% 0.25% 0.49% 0.38% 1.39%
 
1972-4 0.33% 1 0.57% 3 0.87% 4 -0.32% 5 1.44%
1976-4 -0.66% 4 0.50% 5 -0.55% 2 0.28% 3 -0.43%
1980-4 0.60% 2 0.65% 3 1.54% 4 0.71% 1 3.50%
1984-4 0.01% 1 0.33% 2 -0.61% 4 -0.34% 5 -0.61%
1988-4 -0.63% 5 1.48% 2 -1.37% 3 -0.09% 4 -0.61%
Avg -0.07% 0.71% -0.02% 0.05% 0.66%
 
1992-4 1.16% 3 -0.27% 4 0.50% 1 -1.13% 2 0.26%
1996-4 0.78% 1 -0.34% 2 -0.18% 3 -2.22% 5 -1.96%
2000-4 1.01% 1 -1.57% 3 0.73% 4 1.52% 5 1.69%
2004-4 -1.04% 4 -0.32% 5 -0.81% 2 0.19% 3 -1.98%
2008-4 0.38% 2 -1.82% 3 0.11% 4 -0.84% 1 -2.17%
Avg 0.46% -0.86% 0.07% -0.50% -0.83%
 
SPX summary for Presidential Year 4 1928 - 2008
Averages 0.25% 0.07% 0.37% -0.23% 0.45%
% Winners 62% 52% 62% 43% 67%
MDD 7/7/1932 3.26% -- 7/5/1996 2.73% -- 7/7/2008 2.54%
 
SPX summary for all years 1928 - 2011
Averages 0.32% 0.18% 0.32% 0.06% 0.86%
% Winners 70% 59% 61% 58% 70%
MDD 7/7/2009 4.58% -- 7/2/2002 4.30% -- 7/6/2001 3.73%


Money supply (M2)

M2

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


July

Since 1963, over all years, the OTC in July has been up 51% of the time with an average gain of 0.1%. During the 4th year of the Presidential Cycle July has been up 42% time with an average loss of -1.3%. The best July ever for the OTC was 1997 (+10.8%), the worst 1996 (-9.8%).

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 July 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 57% of the time in July with an average gain of 1.2%. During the 4th year of the Presidential Cycle the SPX has been up 48% of the time with an average gain of 1.7% (helped considerably by a 32.6% gain in 1932). The best July for the SPX was 1932 (+32.6%) the worst 1933 (-11.1%).

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

Since 1979 the Russell 2000 (R2K) has been up 48% of the time in July with an average loss of -0.5%. During the 4th year of the Presidential Cycle the R2K has been up 38% of the time with an average loss of -1.0%. The best July ever for the R2K, 1980 (+10.5%), the worst 2002 (-12.4%)

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

Since 1885 the DJIA has been up 58% of the time in July with an average gain of 1.0%. During the 4th year of the Presidential Cycle the DJIA has been up 52% of the time in July with an average gain of 1.6%. The best July ever for the DJIA 1932 (+22.2%), the worst 1893 (-16.1%)

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


Conclusion

Friday's large equity gains were credited to the largest dollar decline in months. Now if Germany will agree to pay everyone else's bills life will be good. The breadth indicators are going in the right direction.

I expect the major averages to be higher on Friday July 6 than they were on Friday June 29.

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Good Luck,

YTD W 8 /L11/T 7

 


 

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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