Technical Market Report for October 10, 2015

By: Mike Burk | Sat, Oct 10, 2015
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The good news is:

• Last week new lows disappeared and new highs began accumulating.


The negatives

The major indices are up 7% - 8% in the past 2 weeks; the market is overbought.


The positives

New lows disappeared last week. On the NYSE there were 268 new lows on Friday October 2 and 20 on Monday October 5, a decline of over 90%. On the NASDAQ there were 200 new lows on Friday October 2 and 38 on the following Monday, an 80% decline. I have been talking about how new lows will disappear when a bottom has been reached. There it is.

The first chart shows the S&P 500 (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 vertical lines have been drawn on the 1st trading day of each month. Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

In one week this indicator has gone from an extremely negative 4% to a comfortably positive 74%.

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

OTC HL Ratio jumped from 10% to 58%.

New highs reached their highest levels in 2 months.

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.

The first signs of life we have seen in this indicator in 3 months.

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

The pattern is similar to NY NH.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of October during the 3rd year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

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 positive over all years, but very negative during the 3rd year of the Presidential Cycle.

Report for the week before the 3rd Friday of October.
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 0.26% -0.03% 0.14% 0.90% 0.26% 1.53%
1967-3 -0.29% -0.91% -0.45% 0.24% 0.04% -1.38%
1971-3 -0.03% 0.18% -0.20% -0.74% -0.25% -1.03%
 
1975-3 0.96% 0.63% 0.01% 0.03% -0.75% 0.88%
1979-3 -1.65% -0.04% 0.51% 0.30% -2.06% -2.93%
1983-3 -0.12% -2.10% -1.33% 0.50% -0.63% -3.67%
1987-3 -1.23% 0.41% -1.50% -1.35% -3.83% -7.50%
1991-3 1.27% 1.61% 1.28% -0.86% 0.49% 3.79%
Avg -0.15% 0.10% -0.21% -0.28% -1.36% -1.89%
 
1995-3 -0.03% 1.70% 0.97% 0.15% -0.72% 2.07%
1999-3 1.02% -1.50% -2.48% 0.20% -2.67% -5.43%
2003-3 0.95% 0.50% -0.21% 0.57% -1.94% -0.13%
2007-3 -0.91% -0.58% 1.04% 0.24% -2.65% -2.86%
2011-3 -1.98% 1.63% -2.01% -0.21% 1.49% -1.08%
Avg -0.19% 0.35% -0.54% 0.19% -1.30% -1.49%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg -0.14% 0.12% -0.33% 0.00% -1.02% -1.37%
Win% 38% 54% 46% 69% 31% 31%
 
OTC summary for all years 1963 - 2014
Avg 0.35% -0.02% -0.23% 0.45% -0.12% 0.43%
Win% 61% 54% 49% 65% 56% 52%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.32% 0.73% 1.01% 1.24% 0.00% 3.29%
1959-3 0.56% -0.28% -0.79% 0.28% 0.81% 0.59%
1963-3 0.04% 0.14% 0.79% 0.40% 0.08% 1.45%
1967-3 -0.78% -0.26% 0.26% 0.19% -0.05% -0.64%
1971-3 -0.20% 0.41% -0.54% -0.91% -0.35% -1.59%
Avg -0.01% 0.15% 0.15% 0.24% 0.12% 0.62%
 
1975-3 1.42% -0.20% -0.06% 0.16% -0.57% 0.75%
1979-3 -1.08% -0.16% 0.19% 0.21% -1.94% -2.78%
1983-3 0.34% -1.54% -0.64% 0.15% -0.62% -2.31%
1987-3 -0.54% 1.66% -2.95% -2.34% -5.16% -9.34%
1991-3 1.32% 1.17% 0.46% -0.22% 0.15% 2.87%
Avg 0.29% 0.19% -0.60% -0.41% -1.63% -2.16%
 
1995-3 -0.25% 0.64% 0.11% 0.55% -0.54% 0.51%
1999-3 -0.06% -1.66% -2.09% -0.17% -2.81% -6.79%
2003-3 0.70% 0.40% -0.26% 0.32% -1.02% 0.13%
2007-3 -0.84% -0.66% 0.18% -0.08% -2.56% -3.96%
2011-3 -1.94% 2.04% -1.26% 0.46% 1.88% 1.18%
Avg -0.48% 0.15% -0.67% 0.21% -1.01% -1.78%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.07% 0.16% -0.37% 0.01% -0.91% -1.11%
Win% 47% 53% 47% 67% 29% 53%
 
SPX summary for all years 1953 - 2014
Avg 0.40% 0.00% -0.26% 0.25% -0.16% 0.23%
Win% 64% 39% 48% 60% 49% 60%


Conclusion

The late September low appears to have been a successful retest of the August low. By that I mean it is unlikely the major averages will fall below the August and September lows any time soon. The major averages have been up 7% - 8% in the past 2 weeks so the market is overbought and seasonality for next week is negative.

I expect the major averages to be lower on Friday October 16 than they were on Friday October 9.

Last weeks negative forecast was a miss

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Good Luck,

YTD W 15 / L 15 / T 10

 


 

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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