Technical Market Report for June 6, 2015

By: Mike Burk | Sat, Jun 6, 2015
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The good news is:
• The secondaries have been stronger than the blue chips.


The negatives

The market, measured by the blue chip indices and NYSE new lows, had a rough week

The chart below covers the past 6 months showing the S&P500 (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 continued to deteriorate.

NY NH Chart

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

This chart could be considered a positive because OTC NH headed upward last week. The problem is the level which is uncomfortably low for an index only slightly off its all time high.

OTC NH Chart

The next chart covers the past 6 months showing the SPX in red and a 10% trend of NYSE new lows (NY NL) in blue. NY NL has been plotted on an inverted Y axis so increasing new lows move the indicator downward. Up is good.

The NYSE new low list is heavily populated with natural resource companies, REITS and fixed income issues.

Nothing good is going to happen while this indicator is heading downward.

NY NL Chart

For contrast, the following chart is similar to the one above except it shows the OTC in blue and OTC NL has been calculated with NASDAQ data.

OTC NL has been moving upward for the past 2 weeks.

OTC NL Chart

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

NY HL Ratio fell into negative territory last week.

NY HL Ratio Chart


The positives

The secondaries have been stronger than the blue chips and NASDAQ breadth data has been stronger than NYSE breadth data. If this pattern continues, market direction should resolve itself to the upside.

The chart below is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.

The dichotomy in breadth data is clearly visible in the differences between OTC HL Ratio and NY HL Ratio. OTC HL Ratio is at a comfortable 72% while NY HL Ratio is at 40% and falling.

OTC HL Ratio Chart


Seasonality

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

OTC data covers the period from 1963 to 2014 while SPX data runs from 1953 to 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 modestly negative by all measures.

Report for the week before the 2nd Friday of June.
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 -0.21% -0.30% 0.21% 0.39% -0.18% -0.09%
1967-3 -1.39% -1.02% 1.26% 0.94% 0.83% 0.61%
1971-3 0.09% -0.67% -0.21% 0.25% 0.13% -0.41%
 
1975-3 -0.90% -0.73% 0.24% -0.73% 0.53% -1.58%
1979-3 0.14% 0.81% 0.45% 0.70% 0.30% 2.41%
1983-3 0.52% -0.42% -0.53% 0.08% 0.80% 0.45%
1987-3 0.38% 0.54% 0.27% 0.13% 0.47% 1.80%
1991-3 -0.54% 0.16% -1.12% 0.02% 0.80% -0.69%
Avg -0.08% 0.07% -0.14% 0.04% 0.58% 0.48%
 
1995-3 1.13% -0.39% 0.25% 0.52% -0.20% 1.31%
1999-3 2.44% -1.97% 1.81% -1.38% -1.48% -0.57%
2003-3 -1.44% 1.48% 1.13% 0.46% -1.64% -0.01%
2007-3 0.17% -0.27% -0.92% -1.77% 1.27% -1.53%
2011-3 -1.11% -0.04% -0.97% 0.35% -1.53% -3.29%
Avg 0.24% -0.24% 0.26% -0.36% -0.72% -0.82%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg -0.05% -0.22% 0.14% 0.00% 0.01% -0.12%
Win% 54% 31% 62% 77% 62% 38%
 
OTC summary for all years 1963 - 2014
Avg -0.21% -0.19% 0.01% 0.06% 0.10% -0.23%
Win% 50% 31% 51% 65% 62% 38%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.83% 0.70% 0.67% -0.54% 0.62% 2.28%
1959-3 -1.30% -0.70% 1.47% 0.10% 0.07% -0.36%
1963-3 -0.67% 0.13% 0.54% -0.26% 0.03% -0.22%
1967-3 -1.51% 2.04% 0.75% 0.54% 0.18% 1.99%
1971-3 -0.16% -0.81% -0.03% 0.35% 0.43% -0.22%
Avg -0.56% 0.27% 0.68% 0.04% 0.26% 0.69%
 
1975-3 -1.37% -0.84% 0.12% -0.52% 0.49% -2.13%
1979-3 0.15% 1.31% 0.68% 0.48% -0.29% 2.32%
1983-3 0.25% -1.25% -0.87% 0.29% 0.53% -1.05%
1987-3 1.11% 0.19% 0.06% 0.42% 0.97% 2.76%
1991-3 -0.23% 0.66% -1.15% 0.26% 1.23% 0.77%
Avg -0.02% 0.01% -0.23% 0.19% 0.58% 0.53%
 
1995-3 0.58% -0.01% -0.45% -0.15% -0.83% -0.86%
1999-3 0.50% -1.28% 0.10% -1.21% -0.70% -2.58%
2003-3 -1.20% 0.91% 1.28% 0.10% -0.99% 0.11%
2007-3 0.18% -0.53% -0.89% -1.76% 1.14% -1.86%
2011-3 -1.08% -0.10% -0.42% 0.74% -1.40% -2.25%
Avg -0.20% -0.20% -0.07% -0.45% -0.56% -1.49%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.26% 0.03% 0.12% -0.08% 0.10% -0.09%
Win% 47% 47% 60% 60% 67% 40%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.22% -0.06% 0.02% 0.09% 0.16% -0.02%
Win% 45% 42% 46% 58% 61% 45
 
SPX summary for all years 1953 - 2014
Avg -0.22% -0.06% 0.02% 0.09% 0.16% -0.02%
Win% 45% 42% 46% 58% 61% 45%


Money supply (M2)

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

S&P500 Daily Chart and M2 Money Supply


Conclusion

For the past several weeks the secondaries and NASDAQ breadth indicators have been stronger than the blue chips and NYSE breadth indicators. Seasonality for next week has been negative so this period of weakness probably has a few more days to run.

I expect the major averages to be lower on Friday June 12 than they were on Friday June 5.

Last week the secondaries were up and the blue chips were down so I am calling last weeks positive forecast a tie.

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Good Luck,

YTD W 8 / L 8 / T 6

 


 

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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