Technical Market Report for April 27, 2013

By: Mike Burk | Sat, Apr 27, 2013
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The good news is:
• Seasonally the next month (May) has been very strong during the 1st year of the Presidential Cycle.


The negatives

New highs continued to deteriorate last week

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 has deteriorated badly while the index is only 0.6% off its recent high.

OTC New Highs Chart

The next chart 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 SPX is only 0.7% off its all time high while NY NH has deteriorated significantly.

NYSE New Highs Chart


The positives

New lows disappeared last week.

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

OTC HL Ratio recovered last week.

OTC HL Ratio Chart

The chart below is similar to the one above except it shows SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio recovered nicely last week.

NYSE HL Ratio Chart

The High/Low ratios recovered because there was a modest increase in new highs and an almost complete disappearance of new lows. New highs decline with pull backs in prices, but, nothing serious happens without an expansion of new lows and, so far, we have not seen that.


Seasonality

Next week includes the last 2 trading days of April and the 1st 3 trading days of May during the 1st year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the last 2 trading days April and the 1st 3 trading days of May during the 1st year of the Presidential Cycle.

OTC data covers the period from 1963 - 2012 and SPX data covers the period from 1928 - 2012. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

During the 1st year of the Presidential Cycle the coming week has not been down in over 20 years. Measured by the SPX it has been up 83% of the time since 1929.

Report for the last 2 days of April and first 3 days of May.
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 1
  Day2 Day1 Day1 Day2 Day3 Totals
1965-1 0.56% 4 -0.31% 5 0.27% 1 -0.04% 2 0.31% 3 0.80%
1969-1 1.06% 2 1.81% 3 0.26% 4 0.12% 5 0.34% 1 3.59%
 
1973-1 -1.20% 5 -0.51% 1 0.10% 2 1.01% 3 0.70% 4 0.10%
1977-1 0.28% 4 0.44% 5 0.37% 1 0.40% 2 0.44% 3 1.93%
1981-1 -0.65% 3 0.24% 4 -0.03% 5 -1.55% 1 -0.83% 2 -2.82%
1985-1 -0.71% 1 -0.55% 2 -0.33% 3 -0.22% 4 0.47% 5 -1.35%
1989-1 0.66% 4 0.32% 5 -0.02% 1 0.13% 2 0.19% 3 1.28%
Avg -0.32% -0.01% 0.02% -0.05% 0.19% -0.17%
 
1993-1 0.04% 4 0.45% 5 0.80% 1 1.72% 2 0.75% 3 3.76%
1997-1 2.10% 2 1.46% 3 0.77% 4 2.74% 5 2.60% 1 9.67%
2001-1 2.01% 5 1.95% 1 2.46% 2 2.42% 3 -3.35% 4 5.48%
2005-1 -1.36% 4 0.92% 5 0.36% 1 0.23% 2 1.51% 3 1.66%
2009-1 2.28% 3 0.31% 4 0.11% 5 2.58% 1 -0.54% 2 4.75%
Avg 1.01% 1.02% 0.90% 1.94% 0.19% 5.06%
 
OTC summary for Presidential Year 1 1965 - 2009
Averages 0.42% 0.55% 0.43% 0.79% 0.22% 2.40%
% Winners 67% 75% 75% 75% 75% 83%
MDD 5/3/2001 3.35% -- 5/5/1981 2.79% -- 5/2/1985 1.81%
 
OTC summary for all years 1963 - 2012
Averages 0.19% 0.22% 0.33% 0.16% 0.04% 0.94%
% Winners 66% 66% 63% 70% 59% 64%
MDD 5/3/2000 6.34% -- 5/3/2002 4.45% -- 5/5/2010 4.36%
 
SPX Presidential Year 1
  Day2 Day1 Day1 Day2 Day3 Totals
1929-1 -0.47% 1 1.61% 2 0.19% 3 0.46% 4 1.00% 5 2.79%
 
1933-1 1.69% 5 6.26% 6 1.32% 1 0.36% 2 -0.59% 3 9.03%
1937-1 0.00% 4 2.75% 5 0.00% 6 0.24% 1 1.58% 2 4.57%
1941-1 0.21% 2 -1.38% 3 -0.11% 4 0.32% 5 0.21% 6 -0.74%
1945-1 0.61% 6 0.34% 1 -0.34% 2 -0.14% 3 0.68% 4 1.16%
1949-1 0.14% 5 0.20% 6 0.27% 1 0.47% 2 1.14% 3 2.23%
Avg 0.53% 1.63% 0.23% 0.25% 0.60% 3.25%
 
1953-1 0.65% 3 -0.24% 4 0.45% 5 1.09% 1 0.12% 2 2.07%
1957-1 0.51% 1 0.02% 2 0.61% 3 0.80% 4 -0.11% 5 1.84%
1961-1 -0.14% 4 -0.23% 5 -0.21% 1 0.72% 2 0.82% 3 0.96%
1965-1 -0.08% 4 0.20% 5 0.13% 1 0.31% 2 0.22% 3 0.80%
1969-1 0.74% 2 0.88% 3 -0.17% 4 0.47% 5 0.36% 1 2.28%
Avg 0.34% 0.13% 0.16% 0.68% 0.28% 1.59%
 
1973-1 -1.52% 5 -0.24% 1 0.12% 2 1.24% 3 1.65% 4 1.25%
1977-1 0.24% 4 0.24% 5 0.50% 1 0.51% 2 0.53% 3 2.03%
1981-1 -0.95% 3 -0.18% 4 -0.07% 5 -1.54% 1 -0.27% 2 -3.01%
1985-1 -0.85% 1 -0.44% 2 -0.81% 3 0.36% 4 0.60% 5 -1.15%
1989-1 0.86% 4 0.02% 5 -0.17% 1 -0.32% 2 0.01% 3 0.40%
Avg -0.44% -0.12% -0.09% 0.05% 0.51% -0.10%
 
1993-1 0.20% 4 0.30% 5 0.52% 1 0.36% 2 0.11% 3 1.48%
1997-1 2.73% 2 0.92% 3 -0.35% 4 1.81% 5 2.13% 1 7.24%
2001-1 1.50% 5 -0.29% 1 1.36% 2 0.08% 3 -1.49% 4 1.16%
2005-1 -1.14% 4 1.19% 5 0.46% 1 -0.09% 2 1.25% 3 1.68%
2009-1 2.16% 3 -0.10% 4 0.54% 5 3.39% 1 -0.38% 2 5.61%
Avg 1.09% 0.40% 0.50% 1.11% 0.32% 3.43%
 
SPX summary for Presidential Year 1 1929 - 2009
Averages 0.34% 0.56% 0.20% 0.52% 0.46% 2.08%
% Winners 62% 62% 57% 81% 76% 86%
MDD 5/5/1981 2.99% -- 5/1/1985 2.09% -- 4/30/1973 1.76%
 
SPX summary for all years 1928 - 2012
Averages -0.02% 0.26% 0.11% 0.17% 0.21% 0.71%
% Winners 51% 58% 55% 69% 64% 66%
MDD 5/3/1930 8.27% -- 5/3/1932 6.14% -- 5/2/1934 5.09%


Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth appears to have leveled off at its elevated trend.

M2 Money Supply Chart


May

Since 1963, over all years, the OTC in May has been up 58% of the time with an average gain of 0.4%. During the 1st year of the Presidential Cycle the OTC in May has been up 75% of the time with an average gain of 2.6% (helped considerably by a 11.1% gain in 1997). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change 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 daily performance of the OTC in May over all years since 1963, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

OTC May 1963-2013 Chart

Since 1928 the SPX has been up 55% of the time in May with an average loss of 0.2%. During the 1st year of the Presidential Cycle the SPX has been up 57% of the time with an average gain of 1.6%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

The chart below is similar to the one above except it shows the average daily average performance over all years since 1928 for the SPX in May in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.

SPX May 1928-2013 Chart

Since 1979 the Russell 2000 (R2K) has been up 62% of the time in May with an average gain of 1.3%. During the 1st year of the Presidential Cycle the R2K has been up 100% of the time with an average gain of 4.7%. The best May ever for the R2K 1997 (+11.0%), the worst 2012 (-6.7%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in May in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

R2K May 1979-2013 Chart

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 50% of the time in May with an average loss of -0.2%. During the 1st year of the Presidential Cycle the DJIA has been up 56% of the time in May with an average gain of 0.9%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%).

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in May in black and the average performance during the 1st year of the Presidential Cycle in green.

DJIA May 1885-2013 Chart


Conclusion

The deterioration in the number of new highs makes the current market behavior look like a developing top, but, seasonally the next month during the 1st year of the Presidential Cycle has been remarkably strong and the Fed is kicking in 85 Billion a month.

I expect the major averages to be higher on Friday May 3 than they were on Friday April 26.

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Good Luck,

YTD W 8/L 5/T 4

 


 

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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