Technical Market Report for July 25, 2015

By: Mike Burk | Sat, Jul 25, 2015
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The good news is:
• The market is oversold and due for a bounce.


The negatives

Prices began following the breadth indicators downward last week and there is no evidence of a bottom.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue. Dashed vertical lines have been drawn on the 1st trading day of each month. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved sharply downward last week.

NY New Lows Chart

The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NL has been calculated from NASDAQ data.

OTC NL also moved sharply downward last week.

OTC New Lows 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 moved downward finishing the week at a very weak 18%.

NY HL ratio Chart

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 fell to 40%.

OTC HL Ratio Chart


The positives

Many of the breadth oscillators are near extremes so the market is due for a bounce.

New lows are at dangerous levels, however, this will make the identification of a bottom easy when it comes because new lows will suddenly disappear.


Seasonality

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

OTC data covers the period from 1963 to 2014 while SPX data runs from 1928 to 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 most measures.

Report for the Last 5 days of July.
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 0.99% 4 -0.36% 5 -0.36% 1 0.18% 2 0.90% 3 1.35%
1967-3 -0.33% 2 -0.06% 3 0.37% 4 0.76% 5 0.09% 1 0.83%
1971-3 -0.26% 1 -0.71% 2 -1.03% 3 -1.53% 4 -0.51% 5 -4.04%
 
1975-3 -0.64% 5 -0.61% 1 -0.51% 2 0.44% 3 0.19% 4 -1.13%
1979-3 0.69% 3 0.40% 4 0.36% 5 0.37% 1 0.56% 2 2.38%
1983-3 0.04% 1 -0.15% 2 1.50% 3 -2.09% 4 -1.54% 5 -2.24%
1987-3 -0.06% 1 0.26% 2 0.29% 3 0.55% 4 0.31% 5 1.35%
1991-3 0.59% 4 0.49% 5 0.13% 1 1.00% 2 0.76% 3 2.97%
Avg 0.12% 0.08% 0.35% 0.05% 0.06% 0.66%
 
1995-3 1.55% 2 0.65% 3 1.05% 4 -0.53% 5 -0.41% 1 2.31%
1999-3 -2.72% 1 2.31% 2 0.97% 3 -2.43% 4 -0.06% 5 -1.92%
2003-3 1.72% 5 0.27% 1 -0.23% 2 -0.60% 3 0.82% 4 1.98%
2007-3 0.31% 3 -1.84% 4 -1.43% 5 0.82% 1 -1.43% 2 -3.57%
2011-3 -0.56% 1 -0.10% 2 -2.65% 3 0.05% 4 -0.36% 5 -3.61%
Avg 0.06% 0.26% -0.46% -0.54% -0.29% -0.96%
 
OTC summary for Presidential Year 3 1963 - 2011
Averages 0.10% 0.04% -0.12% -0.23% -0.05% -0.26%
% Winners 54% 46% 54% 62% 54% 54%
MDD 7/30/1971 3.98% -- 7/31/2007 3.85% -- 7/29/1983 3.60%
 
OTC summary for all years 1963 - 2014
Averages 0.03% 0.02% -0.12% 0.00% -0.05% -0.12%
% Winners 54% 46% 44% 62% 50% 58%
MDD 7/28/2000 9.10% -- 7/31/1974 6.22% -- 7/31/1969 4.97%
 
SPX Presidential Year 3
  Day5 Day4 Day3 Day2 Day1 Totals
1931-3 0.79% 1 1.07% 2 -3.10% 3 0.44% 4 -0.51% 5 -1.31%
 
1935-3 0.56% 5 1.20% 6 1.10% 1 -0.91% 2 1.28% 3 3.24%
1939-3 1.00% 3 0.08% 4 -0.33% 5 -0.25% 6 -0.58% 1 -0.08%
1943-3 -3.17% 2 -0.34% 3 1.68% 4 -1.90% 5 -1.43% 6 -5.16%
1947-3 -0.25% 5 -0.87% 1 -2.20% 2 -0.45% 3 1.55% 4 -2.22%
1951-3 -0.53% 3 0.67% 4 0.27% 5 0.44% 1 -1.02% 2 -0.17%
Avg -0.48% 0.15% 0.11% -0.61% -0.04% -0.88%
 
1955-3 1.12% 1 0.23% 2 0.41% 3 -0.59% 4 0.05% 5 1.21%
1959-3 0.62% 1 0.50% 2 0.50% 3 -0.20% 4 0.02% 5 1.44%
1963-3 -0.03% 4 0.41% 5 0.19% 1 0.83% 2 -0.16% 3 1.24%
1967-3 0.01% 2 0.34% 3 0.31% 4 0.15% 5 0.28% 1 1.08%
1971-3 -0.27% 1 -0.90% 2 -0.73% 3 -1.08% 4 -0.46% 5 -3.44%
Avg 0.29% 0.12% 0.14% -0.18% -0.06% 0.31%
 
1975-3 -0.87% 5 -0.67% 1 -0.56% 2 0.73% 3 -0.09% 4 -1.47%
1979-3 1.09% 3 0.02% 4 0.00% 5 0.05% 1 0.64% 2 1.80%
1983-3 0.38% 1 0.48% 2 -1.62% 3 -1.52% 4 -1.50% 5 -3.78%
1987-3 0.45% 1 0.54% 2 1.06% 3 0.76% 4 0.19% 5 3.00%
1991-3 0.61% 4 -0.01% 5 0.58% 1 0.92% 2 0.29% 3 2.40%
Avg 0.33% 0.07% -0.11% 0.19% -0.09% 0.39%
 
1995-3 0.80% 2 0.09% 3 0.64% 4 -0.41% 5 -0.15% 1 0.98%
1999-3 -0.68% 1 1.12% 2 0.18% 3 -1.79% 4 -0.92% 5 -2.08%
2003-3 1.74% 5 -0.22% 1 -0.73% 2 -0.18% 3 0.29% 4 0.90%
2007-3 0.47% 3 -2.33% 4 -1.60% 5 1.03% 1 -1.26% 2 -3.71%
2011-3 -0.56% 1 -0.41% 2 -2.03% 3 -0.32% 4 -0.65% 5 -3.97%
Avg 0.35% -0.35% -0.71% -0.33% -0.54% -1.58%
 
SPX summary for Presidential Year 3 1931 - 2011
Averages 0.16% 0.05% -0.28% -0.20% -0.20% -0.48%
% Winners 62% 62% 52% 43% 43% 48%
MDD 7/31/1943 5.12% -- 7/29/1983 4.57% -- 7/31/2007 4.14%
 
SPX summary for all years 1928 - 2014
Averages -0.04% 0.02% 0.08% 0.15% 0.05% 0.26%
% Winners 55% 57% 52% 62% 60% 56%
MDD 7/26/1934 7.83% -- 7/31/1933 6.84% -- 7/31/1974 6.68%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth has leveled off at its trend line.

S&P500 and M2 Money Supply Chart


Conclusion

There is no evidence of a bottom and seasonally this period of weakness is scheduled to last 2 more weeks.

I expect the major averages to be lower on Friday July 31 than they were on Friday July 24.

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Good Luck,

YTD W 10 / L 11 / T 8

 


 

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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