Technical Market Report for November 8, 2014

By: Mike Burk | Sat, Nov 8, 2014
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The good news is:
• The Blue chip indices closed at all time highs on Friday and the NASDAQ composite (OTC) closed at a multi year high on Thursday.


The negatives

The most important marks of a bottom are the abrupt disappearance of new lows and downside volume. Both have declined in the past 3 weeks, but not as sharply as you would expect.

The chart below covers the past 6 months showing the S&P 500 (SPX) in red and a 5% trend (39 day EMA) of NYSE downside volume, (NY DV) in maroon. NY DV has been plotted on an inverted Y axis so decreasing downside volume moves the indicator upward (up is good). Dashed vertical lines have been drawn on the 1st trading day of each month.

The SPX closed at an all time high on Friday while NY DV has remained at a relatively high level (low on the chart).

SPX Chart

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

The picture on the NASDAQ is similar to the NYSE.

NASDAQ


The positives

New highs picked up nicely last week.

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.

In the past 3 weeks, OTC NH has gone from its lowest level in nearly 3 years to very near its highest level of the past 6 months.

OTC NH

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

NY NH has exceeded its high of the August - September rally, but has a way to go before reaching its high of the last 6 months.

NY NH

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

NY HL Ratio held near 80% last week, strong.

NY HL Ratio

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

OTC HL Ratio declined a bit, but finished the week at a comfortable 67%.

OTC HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of November 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 November 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 modestly positive by all measures.

Report for the week before the 2nd Friday of November.
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 0.77% 0.00% 0.54% 0.65% 0.70% 2.66%
1970-2 0.26% 0.96% 0.86% -0.34% -1.33% 0.41%
 
1974-2 -0.68% 2.12% 0.18% 0.80% -0.20% 2.23%
1978-2 -0.36% -1.96% 0.14% 0.79% 0.84% -0.54%
1982-2 -0.13% 1.52% 0.10% 0.48% 0.47% 2.44%
1986-2 -0.28% 0.37% -0.03% -0.88% 0.16% -0.66%
1990-2 1.28% -0.07% -1.10% -0.13% 1.66% 1.65%
Avg -0.03% 0.40% -0.14% 0.21% 0.59% 1.02%
 
1994-2 -0.49% 0.69% -0.04% -0.37% -0.30% -0.51%
1998-2 0.24% 0.24% -0.19% -0.59% -0.17% -0.46%
2002-2 2.63% 0.33% 1.27% -2.98% -1.27% -0.01%
2006-2 1.51% 0.42% 0.38% -0.37% 0.58% 2.51%
2010-2 0.04% -0.66% 0.62% -0.90% -1.46% -2.37%
Avg 0.79% 0.20% 0.41% -1.04% -0.52% -0.17%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg 0.40% 0.36% 0.23% -0.32% -0.02% 0.61%
Win% 58% 73% 67% 33% 50% 50%
 
OTC summary for all years 1963 - 2013
Avg 0.01% 0.14% -0.22% 0.18% -0.07% 0.03%
Win% 49% 61% 53% 57% 60% 49%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.95% 0.39% 0.09% 0.87% 0.21% 2.52%
1958-2 0.59% 0.78% 0.13% -0.41% 0.49% 1.58%
1962-2 1.04% 0.00% 0.62% -0.66% 0.79% 1.78%
1966-2 -0.10% 0.00% 0.81% 0.63% 0.06% 1.39%
1970-2 0.53% 0.14% 0.28% -1.03% -0.93% -1.00%
Avg 0.60% 0.44% 0.39% -0.12% 0.12% 1.25%
 
1974-2 -1.08% 2.78% -0.48% 0.62% -0.40% 1.43%
1978-2 -1.03% -1.41% 0.64% -0.03% 0.37% -1.46%
1982-2 -1.21% 1.84% -1.30% 0.43% -1.57% -1.82%
1986-2 0.15% 0.39% -0.18% -1.47% 0.61% -0.50%
1990-2 0.88% -0.94% -1.80% 0.52% 1.99% 0.65%
Avg -0.46% 0.53% -0.62% 0.01% 0.20% -0.34%
 
1994-2 0.17% 0.56% -0.05% -0.23% -0.43% 0.02%
1998-2 -0.95% -0.17% -0.65% -0.25% 0.67% -1.34%
2002-2 0.82% 0.78% 0.91% -2.29% -0.88% -0.65%
2006-2 1.13% 0.22% 0.21% -0.53% 0.19% 1.22%
2010-2 -0.21% -0.81% 0.44% -0.42% -1.18% -2.18%
Avg 0.19% 0.12% 0.17% -0.74% -0.33% -0.59%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg 0.11% 0.35% -0.02% -0.28% 0.00% 0.11%
Win% 60% 69% 60% 33% 60% 53%
 
SPX summary for all years 1953 - 2013
Avg -0.01% 0.10% -0.10% 0.22% -0.02% 0.17%
Win% 52% 50% 58% 57% 58% 56%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth continued its recovery last week.

M2 Money Supply and SPX Charts


Conclusion

The continued high level of downside volume is a little troubling, and the secondaries did not recover to new highs, but everything else looks pretty good.

I expect the major averages to be higher on Friday November 14 than they were on Friday November 7.

Last week the Russell 2000 was down slightly while everything else was up, so I am calling last weeks positive forecast a tie.

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Good Luck,

YTD W 14 / L 16 / T 15

 


 

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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