Technical Market Report for September 6, 2014

By: Mike Burk | Sat, Sep 6, 2014
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The good news is:
• The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) closed at all time highs last Friday and the NASDAQ composite closed at a multi year high on Tuesday.


The negatives

New lows hit their highest levels in 3 weeks and the secondaries were weaker than the blue chips last week. New highs picked up early in the week before falling off sharply on Friday.

The chart below covers the past 6 months showing the 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 the month.

OTC NH failed to confirm the index high on Tuesday.

OTC NH

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

NY NH also failed to confirm the all time SPX high on Friday.

NY NH


The positives

New lows remained at non threatening levels.

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

NY HL Ratio fell last week, but finished the week at a very strong 84%.

NY HL Ratio

The next chart is similar to the one above except is shows the OTC in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.

OTC HL Ratio also fell last week, but is still strong at 66%.

OTC HL Ratio


Seasonality

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

The tables below show the change, on a percentage basis, of the OTC and SPX for the 5 trading days prior to the 2nd Friday of September during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2013 while SPX data runs from 1953 through 2013. There are summaries for both the 2nd 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 negative by all measures, helped considerably by 9/11/2001.

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

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.00% -0.12% -0.40% -0.99% -0.27% -1.78%
1970-2 0.00% 1.45% 1.99% -0.24% -0.26% 2.93%
 
1974-2 -2.19% -0.67% -0.02% -2.12% -1.82% -6.82%
1978-2 0.00% 0.82% 0.23% 0.23% 0.93% 2.21%
1982-2 0.00% -0.64% 0.50% 0.54% -0.16% 0.24%
1986-2 -1.47% -0.87% -0.74% -3.67% -1.86% -8.61%
1990-2 0.35% -0.59% 0.22% -1.09% -0.47% -1.57%
Avg -1.10% -0.39% 0.04% -1.22% -0.68% -2.91%
 
1994-2 0.00% 0.03% 0.63% 0.66% -0.72% 0.60%
1998-2 0.00% 6.03% -2.19% -2.42% 3.55% 4.97%
2002-2 0.72% 1.19% -0.35% -2.72% 0.92% -0.25%
2006-2 0.00% 0.57% -1.72% -0.58% 0.49% -1.24%
2010-2 0.00% -1.11% 0.90% 0.33% 0.28% 0.40%
Avg 0.72% 1.34% -0.54% -0.95% 0.90% 0.90%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.65% 0.51% -0.08% -1.01% 0.05% -0.74%
Win% 50% 50% 50% 33% 42% 50%
 
OTC summary for all years 1963 - 2013
Avg -0.34% -0.02% -0.11% 0.08% 0.10% -0.10%
Win% 45% 51% 54% 63% 61% 61%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.00% 0.52% 0.07% 0.16% 0.36% 1.11%
1958-2 0.33% 0.69% -0.31% 0.68% -0.23% 1.17%
1962-2 0.12% 0.24% 0.43% -0.24% 0.32% 0.87%
1966-2 0.00% -0.59% -0.81% -0.38% 0.32% -1.46%
1970-2 0.00% 0.25% -0.30% -0.59% 0.27% -0.37%
Avg 0.23% 0.22% -0.18% -0.07% 0.21% 0.26%
 
1974-2 -2.38% -0.69% -1.00% -2.68% -2.26% -9.01%
1978-2 0.00% 0.78% 0.85% 0.04% 1.30% 2.97%
1982-2 0.00% -1.07% 0.68% -0.19% -0.82% -1.39%
1986-2 -0.93% -0.19% -0.25% -4.81% -1.92% -8.09%
1990-2 -0.55% -0.18% 0.47% -1.21% -0.57% -2.04%
Avg -1.29% -0.27% 0.15% -1.77% -0.85% -3.51%
 
1994-2 0.00% 0.18% -0.18% 0.46% -1.05% -0.59%
1998-2 0.00% 5.10% -1.69% -2.59% 2.95% 3.77%
2002-2 1.01% 0.73% -0.01% -2.48% 0.33% -0.42%
2006-2 0.00% 0.17% -0.99% -0.48% 0.38% -0.92%
2010-2 0.00% -1.15% 0.64% 0.48% 0.49% 0.47%
Avg 1.01% 1.01% -0.45% -0.92% 0.62% 0.46%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.40% 0.32% -0.16% -0.92% -0.01% -0.93%
Win% 50% 60% 40% 33% 60% 40%
 
SPX summary for all years 1953 - 2013
Avg -0.26% -0.03% -0.04% -0.16% 0.08% -0.27%
Win% 46% 52% 57% 48% 64% 52%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth continued to fall last week.

M2 Money Supply and SPX Chart


Conclusion

Last week there was deterioration in the breadth indicators while the blue chips moved to all time highs. Seasonally the next few weeks have been very weak.

I expect the major averages to be lower on Friday September 12 than they were on Friday September 5.

Last week the blue chips were up a little while the secondaries were down a little so I am calling last weeks positive forecast a tie.

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Good Luck,

YTD W 9/L 15/T 12

 


 

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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