Technical Market Report for December 20, 2014

By: Mike Burk | Sat, Dec 20, 2014
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The good news is:
• New lows disappeared last week.


The negatives

All of the major indices closed within 1% of their all time or multi year highs on Friday. The breadth indicators, most importantly new highs, did not keep up.

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 failed to keep up with the abrupt increase in prices.

OTC NH Chart

The next chart is similar to the one above except is covers the past year.

Longer term OTC_NH looks worse.

OTC NH Chart 2

The next chart is similar to the first chart covering the past 6 months except is shows the SPX in red and NY NH has been calculated from NYSE data.

NY NH is also lagging prices.

NY NH

The next chart is similar to the one above except it covers the past year.

With the SPX only 0.2% off its all time high NY NH is a long way from its high of the past year.

SPX and NY NH Chart


The positives

New lows disappeared last week, falling from 434 Tuesday to 22 Friday on the NYSE and 228 Tuesday to 51 Friday on the NASDAQ. That move was enough to push the high/low ratios on both exchanges into positive territory.

The chart below 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 rose to a positive 57% on Friday.

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 rose sharply, finishing the week at 66%.

NY HL Ratio


Seasonality

Next week includes 3 trading days prior to Christmas and one day after during the 2nd year of the Presidential Cycle.

The tables below show the daily change, on a percentage basis, of the OTC and SPX for the 3 trading days prior to Christmas during the 2nd year of the Presidential Cycle. The program that generates these reports is unable to account for the day after Christmas; a day which could easily be the slowest trading day of the year.

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 positive by all measures.

Report for the 3 days before Christmas.
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 2
  Day3 Day2 Day1 Totals
1966-2 0.47% 3 0.84% 4 0.34% 5 1.65%
1970-2 0.12% 2 -0.17% 3 0.13% 4 0.08%
 
1974-2 -1.33% 5 -1.38% 1 0.76% 2 -1.95%
1978-2 0.52% 3 0.45% 4 0.93% 5 1.91%
1982-2 0.28% 2 1.10% 3 0.56% 4 1.94%
1986-2 -0.27% 1 -0.72% 2 0.25% 3 -0.74%
1990-2 0.29% 4 0.35% 5 -0.32% 1 0.32%
Avg -0.10% -0.04% 0.44% 0.30%
 
1994-2 1.22% 3 0.26% 4 0.39% 5 1.87%
1998-2 -0.80% 2 2.00% 3 -0.44% 4 0.76%
2002-2 0.66% 5 1.37% 1 -0.67% 2 1.36%
2006-2 -0.08% 3 -0.48% 4 -0.61% 5 -1.17%
2010-2 0.68% 2 0.15% 3 -0.22% 4 0.61%
Avg 0.34% 0.66% -0.31% 0.69%
 
OTC summary for Presidential Year 2 1966 - 2010
Averags 0.15% 0.31% 0.09% 0.55%
%Winners 67% 67% 58% 75%
MDD 12/23/1974 2.69% -- 12/22/2006 1.17% -- 12/23/1986 .99%
 
OTC summary for all years 1963 - 2013
Averags 0.04% 0.26% 0.20% 0.50%
%Winners 57% 67% 65% 65%
 
SPX Presidential Year 2
  Day3 Day2 Day1 Totals
1954-2 0.14% 2 -0.11% 3 0.08% 4 0.11%
1958-2 -0.67% 1 -0.54% 2 1.29% 3 0.09%
1962-2 0.38% 4 -0.29% 5 -0.02% 1 0.08%
1966-2 0.52% 3 0.38% 4 -0.27% 5 0.63%
1970-2 0.11% 2 0.07% 3 0.57% 4 0.74%
Avg 0.10% -0.10% 0.33% 0.33%
 
1974-2 -1.09% 5 -1.42% 1 1.39% 2 -1.12%
1978-2 0.47% 3 0.03% 4 1.69% 5 2.19%
1982-2 1.72% 2 0.16% 3 0.64% 4 2.52%
1986-2 -0.39% 1 -0.97% 2 0.17% 3 -1.19%
1990-2 -0.02% 4 0.49% 5 -0.56% 1 -0.09%
Avg 0.14% -0.34% 0.67% 0.46%
 
1994-2 0.55% 3 0.02% 4 0.03% 5 0.60%
1998-2 0.07% 2 2.00% 3 -0.18% 4 1.89%
2002-2 1.30% 5 0.18% 1 -0.55% 2 0.94%
2006-2 -0.14% 3 -0.37% 4 -0.53% 5 -1.04%
2010-2 0.60% 2 0.34% 3 -0.16% 4 0.78%
Avg 0.48% 0.43% -0.28% 0.63%
 
SPX summary for Presidential Year 2 1964 - 2010
Averags 0.24% 0.00% 0.24% 0.47%
%Winners 67% 60% 53% 73%
MDD 12/23/1974 2.50% -- 12/23/1986 1.36% -- 12/23/1958 1.20%
 
SPX summary for all years 1953 - 2013
Averags 0.11% -0.02% 0.26% 0.35%
%Winners 58% 49% 69% 60%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth slowed down again remaining below its long term trend.

SPX and M2 Money Supply Charts


Conclusion

The next 2 weeks are seasonally strong with very low volume.

I expect the major averages to be higher on Friday December 26 than they were on Friday December 19.

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These reports are archived at: http://www.safehaven.com/

Good Luck,

YTD W 18 / L 16 / T 17

 


 

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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