Technical Market Report for November 15, 2014

By: Mike Burk | Sat, Nov 15, 2014
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The good news is:
• The S&P 500 (SPX) closed at an all time high and the NASDAQ composite (OTC) closed at a multi year high on Friday.


The negatives

The major indices continued to move upward, but new lows and downside volume have remained uncomfortably high.

The chart below covers the past year showing the 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.

NY DV is still lower than it has been most of the time during the past year as the SPX hit an all time high.

NY DV

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.

OTC DV, although a little stronger than NY DV, is at a relatively low level while the index is at a new high.

OTC DV

Advance - Decline lines (ADL) are a running total of declining issues subtracted from advancing issues.

The next chart covers the past 2 years showing the OTC in blue and an ADL calculated from NASDAQ issues (OTC ADL) in green.

Around March of this year the OTC ADL changed from an uptrend (higher highs and higher lows) to a down trend (lower highs and lower lows).

OTC ADL


The positives

New highs and new lows have held at comfortable levels.

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

OTC HL ratio fell a little last week, but remains at a positive 64%.

OTC HL ratio

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

NY HL Ratio also fell a little last week but remains in comfortably positive territory.

NY HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 3rd 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 3rd 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 during the 2nd year of the Presidential Cycle, and modestly negative over all years.

Report for the week before the 3rd Friday of November.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.18% -0.35% 0.90% -0.11% 0.75% 1.37%
1970-2 -1.11% -0.05% -0.07% -0.51% -0.09% -1.82%
 
1974-2 0.32% -2.04% -0.58% 0.09% -0.97% -3.18%
1978-2 -1.60% -1.88% 0.51% 0.69% 1.32% -0.96%
1982-2 -1.41% -1.91% 1.24% 0.67% 0.06% -1.35%
1986-2 -0.42% -1.25% -0.80% 0.68% 0.70% -1.09%
1990-2 2.78% 0.40% 1.13% -0.68% -1.02% 2.62%
Avg -0.07% -1.33% 0.30% 0.29% 0.02% -0.79%
 
1994-2 0.79% 0.11% 0.08% -0.49% -0.15% 0.34%
1998-2 0.74% 0.91% 1.00% 1.18% 0.44% 4.27%
2002-2 -2.95% 2.30% 0.87% 3.69% -0.03% 3.88%
2006-2 0.70% 1.01% 0.50% 0.26% -0.13% 2.33%
2010-2 -0.17% -1.75% 0.25% 1.55% 0.15% 0.02%
Avg -0.18% 0.52% 0.54% 1.24% 0.06% 2.17%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.18% -0.37% 0.42% 0.59% 0.09% 0.54%
Win% 50% 42% 75% 67% 50% 58%
 
OTC summary for all years 1963 - 2013
Avg -0.13% 0.10% -0.09% 0.00% 0.04% -0.08%
Win% 46% 53% 57% 55% 55% 55%
 
Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.21% 0.30% 0.18% -0.56% 0.03% -0.27%
1958-2 0.28% -0.21% 0.13% 0.02% -0.96% -0.73%
1962-2 1.38% -0.22% 1.18% -0.32% 0.32% 2.34%
1966-2 -0.70% 0.39% 0.83% -0.69% -0.66% -0.82%
1970-2 -0.16% 0.12% -0.66% 0.14% 0.98% 0.43%
Avg 0.12% 0.08% 0.33% -0.28% -0.06% 0.19%
 
1974-2 0.32% -1.97% -0.43% -0.40% -1.57% -4.05%
1978-2 -1.73% -0.69% 0.24% 1.08% 0.76% -0.34%
1982-2 -1.79% -1.17% 1.85% 0.30% -0.95% -1.77%
1986-2 -0.53% -2.64% 0.37% 1.85% 1.57% 0.62%
1990-2 1.83% -0.57% 0.86% -1.05% 0.03% 1.10%
Avg -0.38% -1.41% 0.58% 0.35% -0.03% -0.89%
 
1994-2 0.80% -0.22% 0.13% -0.44% -0.45% -0.19%
1998-2 0.91% 0.30% 0.46% 0.71% 0.95% 3.32%
2002-2 -2.07% 0.77% -0.05% 2.46% 0.61% 1.73%
2006-2 0.25% 0.64% 0.24% 0.23% 0.10% 1.46%
2010-2 -0.12% -1.62% 0.02% 1.54% 0.25% 0.07%
Avg -0.05% -0.03% 0.16% 0.90% 0.29% 1.28%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.10% -0.45% 0.36% 0.32% 0.07% 0.19%
Win% 47% 40% 80% 60% 67% 53%
 
SPX summary for all years 1953 - 2013
Avg -0.02% -0.01% -0.05% -0.07% 0.13% -0.02%
Win% 47% 46% 62% 49% 62% 52%


Money Supply (M2)

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

S&P500 and M2 Money Supply Charts


Conclusion

The continued elevated levels of downside volume and new lows is a little troubling. That along with lagging secondaries make the recent market activity look more like a developing top than a bottom following a completed cycle.

I expect the major averages to be lower on Friday November 21 than they were on Friday November 14.

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Good Luck,

YTD W 15 / 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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