Technical Market Report for May 2, 2015

By: Mike Burk | Sat, May 2, 2015
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The good news is:
• The market is oversold and due for a bounce.


The negatives

For the past month the secondaries have been underperforming the blue chips, new highs have been practically non existent and new lows have reached threatening levels.

The chart below covers the past month showing the broad based indices on Log scales to illustrate their relative performance. Dashed vertical lines have been drawn on the first trading day of the week.

The S&P 500 (SPX), in red and NASDAQ composite (OTC), in blue have been the best performers followed by the S&P Mid cap (MID), in green and the small cap Russell 2000 (R2K), in magenta is at the bottom. The small caps usually lead both up and down.

SPX, MID, R2K and NASDAQ Chart

The chart below covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH), in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH has been falling since its high in late January.

NY NH Chart 1

The next chart is similar to the one above except it covers the past 2 years showing new highs have been diminishing for a long time.

NY NH Chart 2

The next chart is similar to the first one except is shows the OTC in blue and OTC NH, in green, has been calculated from NASDAQ data.

New highs disappeared last week.

OTC NH Chart 1

The next chart is similar to the one above except is covers the past 2 years.

OTC NH has been deteriorating for a long time.

OTC NH Chart 2

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

New lows exceeded new highs on the NASDAQ both Thursday and Friday driving OTC HL Ratio below the neutral line.

OTC HL Ratio


The positives

Positives are coming up a bit short, but, on the NYSE new lows have not exceeded new highs for over a month.

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 finished the week at a positive 59%.

NY HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of May during the 3rd year of the Presidential Cycle.

The tables below show the daily change, on a percentage basis for the 5 trading days prior to the 2nd Friday of May 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 mixed.

Report for the week before the 2nd Friday of May.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.45% -0.51% 0.09% 0.09% -0.06% -0.84%
1967-3 1.17% -0.65% -1.31% -0.64% 0.53% -0.89%
1971-3 -0.46% 0.16% 0.04% 0.16% 0.17% 0.07%
 
1975-3 1.11% -0.41% 1.24% 0.38% 0.85% 3.17%
1979-3 -2.33% -0.77% 0.57% -0.48% -0.02% -3.03%
1983-3 0.33% 0.56% -0.48% -0.24% 0.59% 0.76%
1987-3 0.00% 0.95% -0.01% 0.06% 0.13% 1.13%
1991-3 -0.13% 0.01% 0.20% 1.08% -0.88% 0.28%
Avg -0.20% 0.07% 0.30% 0.16% 0.14% 0.46%
 
1995-3 0.68% -0.13% -0.06% 0.73% 0.60% 1.82%
1999-3 0.91% 1.60% 1.55% -0.94% -2.10% 1.02%
2003-3 0.08% 1.31% -1.11% -1.13% 2.04% 1.18%
2007-3 -0.05% 0.03% 0.18% -1.65% 1.12% -0.37%
2011-3 0.55% 1.01% -0.93% 0.63% -1.21% 0.05%
Avg 0.44% 0.76% -0.08% -0.47% 0.09% 0.74%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.11% 0.24% 0.00% -0.15% 0.14% 0.34%
Win% 62% 62% 54% 54% 62% 69%
 
OTC summary for all years 1963 - 2014
Avg 0.06% -0.11% -0.02% -0.09% 0.06% -0.10%
Win% 56% 50% 52% 56% 60% 54%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.11% -0.21% -1.14% -0.59% 0.65% -1.18%
1959-3 0.00% 0.17% -0.24% -1.27% 0.77% -0.56%
1963-3 -0.71% -0.13% 0.82% 0.49% 0.24% 0.70%
1967-3 0.15% -1.04% -0.27% 0.43% -0.29% -1.01%
1971-3 -0.50% 0.25% 0.27% -0.20% -0.47% -0.64%
Avg -0.24% -0.19% -0.11% -0.23% 0.18% -0.54%
 
1975-3 0.96% -1.60% 0.50% 0.54% 1.08% 1.48%
1979-3 -1.66% 0.15% 0.29% -0.95% 0.00% -2.16%
1983-3 -0.17% 0.06% -0.57% -0.43% 0.40% -0.72%
1987-3 0.46% 2.07% 0.04% -0.26% -0.45% 1.86%
1991-3 -0.19% -0.73% 0.32% 1.25% -1.96% -1.31%
Avg -0.12% -0.01% 0.12% 0.03% -0.23% -0.17%
 
1995-3 0.74% -0.08% 0.15% 0.00% 0.23% 1.04%
1999-3 -0.35% 1.14% 0.62% 0.26% -2.18% -0.50%
2003-3 -0.38% 0.85% -0.51% -1.01% 1.43% 0.38%
2007-3 0.26% -0.12% 0.32% -1.40% 0.96% 0.03%
2011-3 0.47% 0.81% -1.11% 0.49% -0.81% -0.15%
Avg 0.15% 0.52% -0.11% -0.33% -0.07% 0.16%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.06% 0.11% -0.03% -0.18% -0.03% -0.18%
Win% 50% 53% 60% 47% 57% 40%
 
SPX summary for all years 1953 - 2014
Avg 0.01% -0.01% 0.00% -0.14% 0.03% -0.11%
Win% 44% 47% 53% 47% 54% 42%


Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth continued to tumble.

S&P500 and M2 Money Supply Charts


Conclusion

The first 6 months of the 3rd year of the Presidential Cycle are the strongest of the entire 4 year cycle and they have been seriously sub par this year. There are 2 months left of this seasonally strong period so we should see some additional new highs, at least in the blue chips in the next 2 months.

I expect the major averages to be lower on Friday May 8 than they were on Friday May 1.

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Good Luck,

YTD W 8 / L 6 / T 3

 


 

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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