Technical Market Report for June 20, 2015

By: Mike Burk | Sat, Jun 20, 2015
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The good news is:
• The Russell 2000 (R2K) and NASDAQ composite (OTC) both closed at all time highs on Thursday.


The negatives

The breadth dichotomy between the NASDAQ and NYSE markets continued last week with the NYSE much weaker than the NASDAQ.

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 positives

To illustrate the dichotomy mentioned above, the chart below is similar to the 1st chart except it shows the OTC in blue and OTC NH, in green, has been calculated from NASDAQ data.

OTC NH has been moving sharply upward for over a month.

OTC 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.

A modest decline in the number of NYSE new lows enabled NY HL Ratio to move above the neutral line late last week.

NY HL Ratio

The next chart 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.

OTC HL Ratio continued its rise, reaching 79%, its strongest level in 2 months.

OTC HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 4th 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 4th 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 slightly negative by most measures.

Report for the week before the 4th Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 0.41% 0.20% -0.41% -0.79% -0.35% -0.94%
1967-3 1.04% 0.01% 0.33% -0.58% 0.24% 1.03%
1971-3 -1.53% -0.95% 0.47% 0.36% 0.18% -1.47%
 
1975-3 0.62% 0.54% 0.08% 0.17% 0.06% 1.47%
1979-3 -0.29% 0.15% 0.29% 0.19% 0.39% 0.73%
1983-3 -0.45% 0.41% 0.68% -0.26% 0.48% 0.86%
1987-3 0.04% -0.30% -0.17% -0.01% -0.12% -0.56%
1991-3 -2.18% -0.41% -0.05% 0.67% -0.07% -2.03%
Avg -0.45% 0.08% 0.17% 0.15% 0.15% 0.09%
 
1995-3 1.48% 0.84% -0.07% 1.17% -0.13% 3.29%
1999-3 2.61% -1.90% 0.69% -1.70% -0.05% -0.35%
2003-3 -2.07% -0.32% -0.18% 1.96% -0.54% -1.15%
2007-3 0.00% 0.01% -1.02% 0.65% -1.07% -1.43%
2011-3 0.50% 2.19% -0.67% 0.66% -1.26% 1.42%
Avg 0.50% 0.16% -0.25% 0.55% -0.61% 0.36%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.01% 0.04% 0.00% 0.19% -0.17% 0.07%
Win% 54% 62% 46% 62% 38% 46%
 
OTC summary for all years 1963- 2014
Avg -0.17% 0.07% 0.13% -0.09% -0.08% -0.15%
Win% 41% 61% 54% 59% 55% 53%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.10% 0.92% 0.22% 0.37% 0.52% 2.13%
Avg 0.10% 0.92% 0.22% 0.37% 0.52% 2.13%
 
1959-3 0.00% -0.02% 0.51% 0.03% 0.96% 1.48%
1963-3 -0.07% -0.23% -0.90% -0.49% 0.43% -1.25%
1967-3 -0.03% -0.03% -0.30% -0.25% 0.03% -0.58%
1971-3 -1.11% -0.29% 0.84% -0.24% -0.18% -0.98%
1975-3 1.09% 0.61% 0.46% 0.20% 0.00% 2.36%
Avg -0.03% 0.01% 0.12% -0.15% 0.31% 0.20%
 
1979-3 -0.52% 0.02% 0.05% 0.45% 0.54% 0.54%
1983-3 -0.07% 0.89% 0.27% -0.25% -0.10% 0.75%
1987-3 0.87% -0.39% -0.51% 0.68% -0.58% 0.07%
1991-3 -1.80% -0.08% 0.25% 0.76% -0.87% -1.74%
1995-3 1.00% -0.04% -0.18% 1.30% -0.25% 1.83%
Avg -0.10% 0.08% -0.02% 0.59% -0.25% 0.29%
 
1999-3 0.45% -0.97% -0.21% -1.30% -0.04% -2.06%
2003-3 -1.31% 0.18% -0.83% 1.08% -0.97% -1.85%
2007-3 -0.12% 0.17% -1.36% 0.62% -1.29% -1.98%
2011-3 0.54% 1.34% -0.65% -0.28% -1.17% -0.22%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.07% 0.14% -0.16% 0.18% -0.21% -0.10%
Win% 43% 47% 47% 60% 36% 47%
 
SPX summary for all years 1953 - 2014
Avg -0.21% 0.14% 0.06% -0.08% -0.14% -0.23%
Win% 38% 56% 53% 51% 44% 51%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth has dropped below its trend line.

S&P500 Daily Chart and M2 Money Supply


Conclusion

The secondary indices have been outperforming the blue chip indices and NASDAQ breadth indicators have been outperforming NYSE breadth indicators. Not perfect, but not bad.

I expect the major averages to be higher on Friday June 26 than they were on Friday June 19.

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Good Luck,

YTD W 9 / L 8 / T 7

 


 

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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