Technical Market Report for February 21, 2015

By: Mike Burk | Sat, Feb 21, 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 are up around 6% so far this month and many of them have been up for 8 consecutive days.

Seasonality for the coming week has been negative.


The positives

New highs have been adequate, but unimpressive while new lows have been minimal.

The chart below covers the past 6 months showing the NASDAQ composite (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 81%.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

OTC HL Ratio Chart

The next chart is similar to the one above except it 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 93%.

NY HL Ratio Chart


Seasonality

Next week includes the last 5 trading days of February during the 3rd year of the Presidential Cycle.

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

OTC data covers the period from 1963 to 2014 while SPX data runs from 1928 through 2014. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Average returns for the coming week have been modestly negative by all measures.

Report for the last 5 days of February.
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 3
  Day5 Day4 Day3 Day2 Day1 Totals
1963-3 -0.32% 4 0.10% 1 -0.58% 2 0.10% 3 -0.52% 4 -1.22%
1967-3 0.19% 2 0.50% 4 0.76% 5 0.02% 1 -0.86% 2 0.60%
1971-3 -1.01% 1 0.04% 2 0.92% 3 0.59% 4 0.11% 5 0.64%
 
1975-3 -0.88% 1 -1.46% 2 0.24% 3 0.40% 4 0.65% 5 -1.06%
1979-3 -0.04% 4 -0.33% 5 -0.11% 1 -1.81% 2 -0.07% 3 -2.35%
1983-3 -0.81% 2 0.31% 3 0.89% 4 0.05% 5 -0.67% 1 -0.23%
1987-3 -0.48% 1 0.52% 2 0.87% 3 0.24% 4 0.70% 5 1.84%
1991-3 0.58% 5 0.48% 1 -0.75% 2 0.69% 3 0.49% 4 1.49%
Avg -0.33% -0.10% 0.23% -0.09% 0.22% -0.06%
 
1995-3 0.42% 3 0.43% 4 -0.03% 5 -0.83% 1 1.18% 2 1.17%
1999-3 2.56% 1 1.43% 2 -1.52% 3 -0.54% 4 -1.67% 5 0.26%
2003-3 -1.97% 1 0.50% 2 -1.90% 3 1.55% 4 1.03% 5 -0.80%
2007-3 0.26% 4 -0.39% 5 -0.42% 1 -3.86% 2 0.34% 3 -4.07%
2011-3 -2.74% 2 -1.21% 3 0.55% 4 1.58% 5 0.04% 1 -1.78%
Avg -0.29% 0.15% -0.67% -0.42% 0.18% -1.04%
 
OTC summary for Presidential Year 3 1963 - 2011
Averages -0.33% 0.07% -0.08% -0.14% 0.06% -0.42%
% Winners 38% 69% 46% 69% 62% 46%
MDD 2/27/2007 4.64% -- 2/23/2011 3.92% -- 2/26/1999 3.68%
 
OTC summary for all years 1963 - 2014
Averages -0.10% 0.10% 0.13% -0.08% -0.10% -0.04%
% Winners 54% 54% 58% 60% 48% 54%
MDD 2/28/2001 6.79% -- 2/27/2007 4.64% -- 2/27/2009 4.44%
 
SPX Presidential Year 3
  Day5 Day4 Day3 Day2 Day1 Totals
1931-3 1.34% 2 -1.10% 3 1.11% 4 -0.77% 5 -0.55% 6 0.03%
 
1935-3 -1.88% 6 -0.11% 1 -1.02% 2 0.34% 3 -0.57% 4 -3.24%
1939-3 0.08% 4 2.45% 5 0.80% 6 -0.08% 1 0.55% 2 3.81%
1943-3 0.65% 2 0.55% 3 0.64% 4 0.00% 5 0.27% 6 2.12%
1947-3 -0.82% 1 -1.28% 2 -1.10% 3 1.18% 4 -0.32% 5 -2.34%
1951-3 0.27% 5 0.18% 6 -0.14% 1 -0.78% 2 0.18% 3 -0.27%
Avg -0.34% 0.36% -0.16% 0.13% 0.02% 0.01%
 
1955-3 -0.11% 1 -0.08% 3 -0.54% 4 -0.14% 5 0.52% 1 -0.35%
1959-3 0.91% 5 -0.07% 2 -0.43% 3 0.18% 4 0.13% 5 0.71%
1963-3 0.14% 4 -0.70% 1 0.02% 2 -0.70% 3 -1.11% 4 -2.36%
1967-3 -0.07% 2 0.13% 4 -0.05% 5 -1.09% 1 0.37% 2 -0.71%
1971-3 -1.05% 1 0.39% 2 0.67% 3 0.20% 4 -0.18% 5 0.02%
Avg -0.04% -0.07% -0.07% -0.31% -0.05% -0.54%
 
1975-3 -1.43% 1 -2.35% 2 1.06% 3 0.50% 4 1.02% 5 -1.20%
1979-3 -0.75% 4 -0.56% 5 -0.11% 1 -1.58% 2 0.16% 3 -2.84%
1983-3 -1.70% 2 0.90% 3 1.91% 4 0.09% 5 -1.12% 1 0.08%
1987-3 -1.09% 1 0.18% 2 0.40% 3 -0.37% 4 0.44% 5 -0.44%
1991-3 0.19% 5 0.44% 1 -1.21% 2 1.36% 3 -0.18% 4 0.59%
Avg -0.96% -0.28% 0.41% 0.00% 0.06% -0.76%
 
1995-3 0.49% 3 0.38% 4 0.28% 5 -0.88% 1 0.71% 2 0.97%
1999-3 2.65% 1 -0.07% 2 -1.40% 3 -0.67% 4 -0.54% 5 -0.02%
2003-3 -1.84% 1 0.72% 2 -1.31% 3 1.17% 4 0.46% 5 -0.79%
2007-3 -0.09% 4 -0.36% 5 -0.13% 1 -3.47% 2 0.56% 3 -3.48%
2011-3 -2.05% 2 -0.61% 3 -0.10% 4 1.06% 5 0.56% 1 -1.15%
Avg -0.17% 0.01% -0.53% -0.56% 0.35% -0.90%
 
SPX summary for Presidential Year 3 1931 - 2011
Averages -0.29% -0.05% -0.03% -0.21% 0.06% -0.52%
% Winners 43% 48% 43% 43% 62% 38%
MDD 2/27/2007 4.02% -- 2/25/1975 3.74% -- 2/28/1935 3.21%
 
SPX summary for all years 1928 - 2014
Averages -0.18% -0.08% 0.06% -0.01% 0.05% -0.15%
% Winners 48% 42% 54% 56% 57% 48%
MDD 2/27/1933 7.21% -- 2/26/1934 6.47% -- 2/26/1946 5.14%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth fell back to the trend line last week.

S&P500 and M2 Money Supply Charts


Conclusion

After a hiccup in January the market has been following the seasonal pattern for the 3rd year of the Presidential Cycle pretty closely. That pattern calls for a little consolidation prior to a very strong March.

I expect the major averages to be lower on Friday February 27 than they were on Friday February 20.

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Good Luck,

YTD W 4 / 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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