Technical Market Report for May 25, 2013

By: Mike Burk | Sat, May 25, 2013
Print Email

The good news is:
• New lows have not increased during this recent dip.


The negatives

New highs fell sharply last week.

Down over 90% on the NYSE to 48 on Thursday from 498 on Monday.

Down over 80% on the NASDAQ to 49 on Thursday from 291 on Monday.

All of the major indices closed at multi year or all time highs on Tuesday.

Tuesday's highs were confirmed by the breadth indicators which implies additional highs for, at least, the blue chip averages in the near future.

The rapid decline in new highs suggests a very good possibility the highs, in the near future will not be confirmed. That would be a setup for a cycle top.


The positives

New highs fell sharply, but there was no significant increase in new lows.

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 / (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 fell last week, but closed the week at a strong 82%. There are trading systems that impose a no sell filter when variations of this indicator are above 80%.

OTC HL Ratio fell last week

The chart below is similar to the one above except it shows S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio fell to 77% on Friday, still very strong.

NY HL Ratio fell to 77% on Friday


Seasonality

Next week includes the last 4 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 4 trading days of May during the 1st year of the Presidential Cycle.

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

The coming week has been pretty much flat on average and a little weaker during the 1st year of the Presidential Cycle than other years.

Report for the last 4 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
  Day4 Day3 Day2 Day1 Totals
1965-1 -0.73% 2 0.60% 3 -0.83% 4 -0.36% 5 -1.32%
1969-1 -0.13% 1 -0.09% 2 -0.75% 3 -0.27% 4 -1.24%
 
1973-1 0.86% 5 -0.30% 2 -1.58% 3 -0.53% 4 -1.56%
1977-1 -0.50% 3 -0.01% 4 -0.28% 5 -0.32% 2 -1.11%
1981-1 0.46% 2 0.88% 3 0.51% 4 0.07% 5 1.92%
1985-1 -0.43% 2 -0.08% 3 -0.24% 4 0.30% 5 -0.46%
1989-1 0.32% 4 0.52% 5 -0.22% 2 0.44% 3 1.06%
Avg 0.14% 0.20% -0.36% -0.01% -0.03%
 
1993-1 0.05% 2 1.30% 3 0.07% 4 -0.58% 5 0.85%
1997-1 1.40% 2 0.07% 3 -0.51% 4 -0.19% 5 0.77%
2001-1 -1.36% 5 -3.35% 2 -4.18% 3 1.25% 4 -7.65%
2005-1 -0.56% 3 1.03% 4 0.22% 5 -0.36% 2 0.33%
2009-1 3.45% 2 -1.11% 3 1.20% 4 1.29% 5 4.83%
Avg 0.60% -0.41% -0.64% 0.28% -0.17%
 
OTC summary for Presidential Year 1 1965 - 2009
Averages 0.24% -0.05% -0.55% 0.06% -0.30%
% Winners 50% 50% 33% 42% 50%
MDD 5/30/2001 8.65% -- 5/31/1973 2.41% -- 5/28/1965 1.32%
 
OTC summary for all years 1963 - 2012
Averages 0.07% 0.05% 0.24% 0.28% 0.64%
% Winners 52% 62% 58% 70% 62%
MDD 5/30/2001 8.65% -- 5/27/1970 3.17% -- 5/25/1999 2.97%
 
SPX Presidential Year 1
  Day4 Day3 Day2 Day1 Totals
1929-1 -3.32% 1 1.61% 2 0.12% 3 0.85% 5 -0.73%
 
1933-1 2.86% 5 3.21% 6 1.45% 1 -1.43% 3 6.10%
1937-1 -1.28% 2 -0.12% 3 0.18% 4 0.00% 5 -1.21%
1941-1 0.64% 2 0.00% 3 -0.11% 4 -0.32% 6 0.22%
1945-1 0.54% 6 1.08% 1 0.53% 2 -0.66% 4 1.49%
1949-1 0.48% 3 -0.07% 4 -0.34% 5 -2.21% 2 -2.13%
Avg 0.65% 0.82% 0.34% -0.92% 0.89%
 
1953-1 -0.48% 2 -0.92% 3 -0.73% 4 0.33% 5 -1.81%
1957-1 -0.91% 1 -0.19% 2 0.90% 3 0.68% 5 0.48%
1961-1 -0.63% 3 -0.38% 4 0.64% 5 0.20% 3 -0.18%
1965-1 0.58% 2 -0.34% 3 -0.52% 4 0.66% 5 0.38%
1969-1 -0.22% 1 -0.76% 2 -0.30% 3 0.19% 4 -1.08%
Avg -0.33% -0.52% 0.00% 0.41% -0.44%
 
1973-1 0.75% 5 -0.40% 2 -1.49% 3 -0.91% 4 -2.05%
1977-1 -0.92% 3 0.25% 4 -0.76% 5 -0.16% 2 -1.59%
1981-1 1.10% 2 0.75% 3 -0.24% 4 -0.64% 5 0.97%
1985-1 -0.23% 2 -0.10% 3 0.04% 4 0.96% 5 0.67%
1989-1 0.01% 4 0.76% 5 -0.79% 2 0.46% 3 0.44%
Avg 0.14% 0.25% -0.65% -0.06% -0.31%
 
1993-1 0.19% 2 1.02% 3 -0.23% 4 -0.49% 5 0.49%
1997-1 0.32% 2 -0.29% 3 -0.37% 4 0.50% 5 0.15%
2001-1 -1.18% 5 -0.78% 2 -1.57% 3 0.62% 4 -2.91%
2005-1 -0.34% 3 0.64% 4 0.10% 5 -0.61% 2 -0.21%
2009-1 2.63% 2 -1.90% 3 1.54% 4 1.36% 5 3.63%
Avg 0.32% -0.26% -0.10% 0.28% 0.23%
 
SPX summary for Presidential Year 1 1929 - 2009
Averages 0.03% 0.15% -0.09% -0.03% 0.05%
% Winners 52% 38% 43% 52% 52%
MDD 5/30/2001 3.49% -- 5/27/1929 3.32% -- 5/31/1973 2.77%
 
SPX summary for all years 1928 - 2012
Averages 0.09% -0.04% 0.22% 0.05% 0.31%
% Winners 56% 49% 61% 58% 62%
MDD 5/31/1932 12.52% -- 5/28/1962 8.45% -- 5/31/1935 4.49%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 has been growing at the trend rate.

M2 Money Supply


Conclusion

The market finally sold off a bit last week, no surprises there, it was very overbought. The surprise was how sharply new highs declined. Fed is still throwing $85 billion a month at the markets so nothing very bad is likely to happen.

I expect the major averages to be higher on Friday May 31 than they were on Friday May 24.

Last weeks positive forecast was a miss.

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

Good Luck,

YTD W 11/L 6/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.

Copyright © 2003-2017 Mike Burk

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