Technical Market Report for June 13, 2015

By: Mike Burk | Sat, Jun 13, 2015
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The good news is:
• NASDAQ breadth indicators have been stronger than NYSE breadth indicators.


The negatives

The market, measured by the blue chip indices and NYSE breadth indicators, had another rough week. The new low list was heavily populated with fixed income and natural resource issues.

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 remained near its low of the past 6 months.

NY NH 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 remained in negative territory last week.

NY HL Ratio Chart


The positives

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

The chart below is similar to the 1st chart except it shows the NASDAQ composite (OTC) in blue and OTC NH has been calculated from NASDAQ data.

OTC NH continued to rise in spite of the OTC declining slightly for the week.

OTC NH Chart

The next chart is similar to the 2nd chart 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 continued with clearly visible differences between NASDAQ and NYSE breadth data.

OTC HL Ratio rose to a comfortable 75% while NY HL Ratio remained in negative territory.

OTC HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd 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 3rd 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 mixed, but much stronger during the 3rd year of the Presidential Cycle than other years.

Report for the week before the 3rd Friday of June.
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 -0.03% 0.03% 0.44% 0.27% 0.24% 0.94%
1967-3 0.73% 0.67% 0.64% 0.15% 0.62% 2.81%
1971-3 -0.57% -0.19% 0.07% 0.00% -1.17% -1.86%
 
1975-3 0.70% -0.69% 0.05% 1.29% 0.82% 2.16%
1979-3 0.06% 0.65% 0.07% 0.01% 0.17% 0.95%
1983-3 0.89% 0.63% 0.62% 1.38% -0.12% 3.41%
1987-3 0.00% 0.50% 0.21% 0.12% 0.03% 0.87%
1991-3 -0.15% -0.55% -1.27% 0.11% -0.01% -1.88%
Avg 0.30% 0.11% -0.06% 0.58% 0.18% 1.10%
 
1995-3 0.41% 0.70% 0.17% 0.78% 0.66% 2.72%
1999-3 -2.03% 0.68% 4.27% 1.04% 0.76% 4.73%
2003-3 2.46% 0.11% 0.52% -1.70% -0.24% 1.16%
2007-3 -0.05% -0.87% 1.28% 0.66% 1.05% 2.06%
2011-3 -0.15% 1.48% -1.76% -0.29% -0.28% -1.01%
Avg 0.13% 0.42% 0.89% 0.10% 0.39% 1.93%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.17% 0.24% 0.41% 0.32% 0.19% 1.31%
Win% 54% 69% 85% 83% 62% 77%
 
OTC summary for all years 1963 - 2014
Avg -0.17% 0.12% 0.01% -0.07% 0.02% -0.08%
Win% 44% 60% 63% 45% 59% 52%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.94% -0.13% 0.81% 0.18% 0.35% 2.15%
1959-3 -0.52% -0.75% 0.94% -0.07% 0.14% -0.27%
1963-3 -0.44% 0.11% 0.10% -0.11% 0.34% 0.00%
1967-3 0.52% 0.63% -0.24% 0.10% 0.05% 1.07%
1971-3 -0.84% 0.10% 0.20% -0.02% -1.52% -2.08%
Avg -0.07% -0.01% 0.36% 0.01% -0.13% 0.17%
 
1975-3 1.04% -0.96% -0.21% 1.80% 0.64% 2.31%
1979-3 0.41% 0.92% -0.53% -0.11% -0.11% 0.60%
1983-3 1.33% 0.42% 0.96% 1.21% -0.01% 3.91%
1987-3 0.35% 0.68% 0.02% 0.29% 0.42% 1.76%
1991-3 -0.57% -0.41% -0.92% 0.09% 0.62% -1.19%
Avg 0.51% 0.13% -0.14% 0.66% 0.31% 1.48%
 
1995-3 0.56% 0.97% 0.08% 0.12% 0.50% 2.23%
1999-3 0.02% 0.56% 2.24% 0.71% 0.22% 3.76%
2003-3 2.24% 0.09% -0.16% -1.52% 0.00% 0.65%
2007-3 0.10% -1.07% 1.52% 0.48% 0.65% 1.68%
2011-3 0.07% 1.26% -1.74% 0.18% 0.30% 0.06%
Avg 0.60% 0.36% 0.39% -0.01% 0.42% 1.68%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg 0.35% 0.16% 0.20% 0.22% 0.19% 1.11%
Win% 73% 67% 60% 67% 79% 80%
 
SPX summary for all years 1953 - 2014
Avg -0.06% 0.15% 0.00% -0.16% 0.00% -0.08%
Win% 58% 56% 48% 47% 60% 53%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth resumed its deterioration last week.

S&P500 and M2 Money Supply Chart


Conclusion

The breadth indicators have been mixed, NASDAQ breadth indicators have been strong and the NYSE breadth indicators have been weak. Seasonality has been very strong for the coming week.

I expect the major averages to be higher on Friday June 19 than they were on Friday June 12.

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

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Good Luck,

YTD W 8 / L 8 / T

 


 

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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