Technical Market Report for February 14, 2015

By: Mike Burk | Sun, Feb 15, 2015
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The good news is:
• Most of the major indices closed at all time or multi year highs Friday.


The negatives

The market is overbought. All of the major indices were up around 5% over the past 2 weeks.

The first chart 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.

The index closed at a multi year high while OTC NH is well off its recent high.

OTC NH Chart

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

The deterioration in OTC NH has been going on for a long time.

OTC NH Chart


The positives

New highs increased while new lows remained benign levels.

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 for the indicator. The line is solid at the neutral 50% level.

OTC HL Ratio finished the week at a very strong 75%.

OTC HL Ratio

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

NY HL Ratio finished the week at a very strong 90%.

NY HL Ratio


Seasonality

Next week includes the 4 trading days prior to the 3rd Friday of February during the 3rd year of the Presidential Cycle. The market will be closed Monday in observance of Presidents day.

The tables below show the daily change, on a percentage basis for the 5 trading days prior to the 3rd Friday of February during the 3rd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2014 while SPX data runs from 1953 through 2014. There are summaries for both the 3rd 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 great during the 3rd year of the Presidential Cycle and mediocre in the other years.

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

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 0.13% -0.23% 0.26% 0.68% 0.65% 1.49%
1967-3 0.08% -0.20% 0.60% 0.33% -0.08% 0.73%
1971-3 0.00% 0.14% -0.44% -0.31% -0.71% -1.33%
 
1975-3 0.00% -1.08% 0.55% 0.97% 0.29% 0.73%
1979-3 0.23% 0.68% -0.22% 0.26% 0.51% 1.46%
1983-3 0.79% 0.15% 0.00% -0.03% 0.88% 1.80%
1987-3 0.00% 1.38% -0.26% -0.01% 0.05% 1.16%
1991-3 1.67% -0.03% 0.90% -0.82% 0.99% 2.72%
Avg 0.90% 0.22% 0.19% 0.07% 0.54% 1.57%
 
1995-3 -0.13% 0.15% 0.63% -0.29% -0.80% -0.43%
1999-3 0.00% -0.34% -2.80% 0.52% 1.02% -1.62%
2003-3 0.00% 2.78% -0.91% -0.23% 1.34% 2.97%
2007-3 -0.38% 0.39% 1.16% 0.35% -0.03% 1.48%
2011-3 0.28% -0.46% 0.76% 0.21% 0.08% 0.87%
Avg -0.08% 0.50% -0.23% 0.11% 0.32% 0.66%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.33% 0.26% 0.02% 0.13% 0.32% 0.93%
Win% 75% 54% 62% 54% 69% 77%
 
OTC summary for all years 1963 - 2014
Avg 0.08% -0.13% 0.05% 0.18% -0.16% -0.01%
Win% 58% 47% 56% 63% 46% 58%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 4.68% -5.14% -0.33% 0.19% 0.14% -0.46%
1959-3 0.15% -0.39% 0.39% 0.95% 0.91% 2.01%
1963-3 -0.62% 0.11% 0.49% 0.30% 0.09% 0.37%
1967-3 0.10% 0.67% 0.11% -0.46% 0.03% 0.46%
1971-3 0.00% 0.23% -0.47% -0.65% -0.84% -1.72%
Avg 1.08% -0.90% 0.04% 0.07% 0.07% 0.13%
 
1975-3 0.00% -0.70% 0.63% 0.95% 0.50% 1.37%
1979-3 0.34% 0.74% -0.06% -0.14% -0.06% 0.82%
1983-3 0.87% -0.42% -0.59% 0.01% 0.38% 0.26%
1987-3 0.00% 2.07% -0.02% 0.05% -0.03% 2.07%
1991-3 2.57% -0.84% 0.96% -1.30% 1.33% 2.72%
Avg 1.26% 0.17% 0.18% -0.09% 0.42% 1.45%
 
1995-3 0.04% 0.19% 0.41% 0.14% -0.67% 0.11%
1999-3 0.00% 0.96% -1.44% 1.09% 0.15% 0.76%
2003-3 0.00% 1.95% -0.71% -0.95% 1.32% 1.61%
2007-3 -0.33% 0.76% 0.76% 0.10% -0.09% 1.21%
2011-3 0.24% -0.32% 0.63% 0.31% 0.19% 1.04%
Avg -0.02% 0.71% -0.07% 0.14% 0.18% 0.95%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg 0.80% -0.01% 0.05% 0.04% 0.22% 0.84%
Win% 80% 60% 53% 67% 67% 87%
 
SPX summary for all years 1953 - 2014
Avg 0.06% -0.05% 0.17% 0.00% -0.01% 0.15%
Win% 47% 54% 58% 52% 47% 58%
 


Money Supply (M2)

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

M2 Money Supply and SPX Charts


Conclusion

The market appears to have gotten over its weak January. Most of the major indices are up around 5% so far in February which makes them, short term, overbought. The breadth indicators are looking good so there should be more records ahead.

I expect the major averages to be higher on Friday February 20 than they were on Friday February 13.

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Good Luck,

YTD W 3 / L 3 / T 0

 


 

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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