Technical Market Report for November 21, 2015

By: Mike Burk | Sat, Nov 21, 2015
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The good news is:
• Last week the market had its best week in a while.


The negatives

In spite of a sensationally strong week for the major indices, new lows exceed new highs every day last week on both the NYSE and NASDAQ.

The secondaries underperformed the blue chips and the AD lines were flat.

The chart below covers the past 6 months showing 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 spite of a strong rally in prices, NY HL Ratio remained in deeply negative territory.

NY HL Ratio Chart

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 has been slightly stronger than NY HL Ratio, but also remained well into negative territory.

OTC HL Ratio Chart

Advance - Decline lines (ADL) are running totals of declining issues subtracted from advancing issues. Their character varies between data sets and over time. It is short term variations over time often give hints as to where the market is headed.

The chart below covers the past year showing the SPX in red and an ADL calculated from NYSE data in blue. The NYSE ADL was very strong until April of this year when it began weakening. Prices held up for several months before catching up with the ADL to the downside. The NYSE ADL has been failing to keep up with prices for the past month.

NYSE ADL Chart

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

The OTC ADL has never been as strong as the NYSE ADL, but the patterns are similar. The OTC ADL also peaked last April and remained very weak during the rally off the late September low.

OTC ADL Chart


The positives

The breadth indicators have been weak, but Seasonality the remainder of the year is pretty strong.


Seasonality

Next week includes the week of Thanksgiving 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 week of Thanksgiving have been modestly positive, but weaker during the 3rd year of the Presidential Cycle than other years and weaker in recent years than the historical average.

Report for the 3 days before Thanksgiving and 1 day after.
Day1 = the day after
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
  Day4 Day3 Day2 Day1 Totals
1963-3 -1.20% 5 -1.48% 2 0.97% 3 0.09% 5 -1.62%
1967-3 -1.99% 1 1.11% 2 1.62% 3 1.02% 5 1.76%
1971-3 -1.13% 1 -1.45% 2 0.09% 3 1.24% 5 -1.26%
 
1975-3 0.23% 1 0.33% 2 0.49% 3 0.31% 5 1.36%
1979-3 0.65% 1 -0.34% 2 -0.44% 3 0.70% 5 0.57%
1983-3 0.63% 1 0.53% 2 0.05% 3 0.28% 5 1.49%
1987-3 0.20% 1 1.13% 2 0.35% 3 -0.41% 5 1.27%
1991-3 -0.68% 1 -0.12% 2 0.11% 3 0.21% 5 -0.48%
Avg 0.21% 0.31% 0.11% 0.22% 0.84%
 
1995-3 -1.48% 1 -0.44% 2 -0.37% 3 0.88% 5 -1.41%
1999-3 0.69% 1 -1.46% 2 2.32% 3 0.80% 5 2.35%
2003-3 2.81% 1 -0.21% 2 0.53% 3 0.36% 5 3.49%
2007-3 -1.66% 1 0.13% 2 -1.33% 3 1.34% 5 -1.52%
2011-3 -1.92% 1 -0.07% 2 -2.43% 3 -0.75% 5 -5.17%
Avg -0.31% -0.41% -0.26% 0.52% -0.45%
 
OTC summary for Presidential Year 3 1963 - 2011
Averages -0.37% -0.18% 0.15% 0.47% 0.06%
% Winners 46% 38% 69% 85% 54%
MDD 11/25/2011 5.09% -- 11/21/2007 2.85% -- 11/26/1963 2.67%
 
OTC summary for all years 1963 - 2014
Averages -0.04% -0.19% 0.36% 0.47% 0.60%
% Winners 50% 53% 77% 81% 65%
 
SPX Presidential Year 3
  Day4 Day3 Day2 Day1 Totals
1955-3 -0.70% 1 0.97% 2 0.13% 3 -0.09% 5 0.31%
1959-3 0.19% 1 0.47% 2 0.16% 3 0.45% 5 1.28%
1963-3 -2.81% 5 3.98% 2 -0.18% 3 1.36% 5 2.35%
1967-3 -1.26% 1 1.58% 2 0.59% 3 0.27% 5 1.18%
1971-3 -0.90% 1 -0.69% 2 0.19% 3 1.78% 5 0.38%
Avg -1.09% 1.26% 0.18% 0.75% 1.10%
 
1975-3 0.19% 1 1.13% 2 0.25% 3 0.33% 5 1.90%
1979-3 0.42% 1 -0.52% 2 0.19% 3 0.75% 5 0.85%
1983-3 0.58% 1 0.48% 2 0.07% 3 0.13% 5 1.26%
1987-3 0.41% 1 1.40% 2 -0.93% 3 -1.54% 5 -0.66%
1991-3 -0.21% 1 0.70% 2 -0.37% 3 -0.35% 5 -0.24%
Avg 0.28% 0.64% -0.16% -0.14% 0.62%
 
1995-3 -0.54% 1 0.57% 2 -0.31% 3 0.26% 5 -0.01%
1999-3 -0.08% 1 -1.14% 2 0.88% 3 -0.04% 5 -0.37%
2003-3 1.62% 1 0.17% 2 0.43% 3 -0.02% 5 2.20%
2007-3 -1.75% 1 0.45% 2 -1.59% 3 1.69% 5 -1.20%
2011-3 -1.86% 1 -0.41% 2 -2.21% 3 -0.27% 5 -4.76%
Avg -0.52% -0.07% -0.56% 0.32% -0.83%
 
SPX summary for Presidential Year 3 1955 - 2011
Averages -0.45% 0.61% -0.18% 0.31% 0.30%
% Winners 40% 73% 60% 60% 60%
MDD 11/25/2011 4.69% -- 11/21/2007 2.88% -- 11/22/1963 2.81%
 
SPX summary for all years 1953 - 2014
Averages -0.11% 0.08% 0.35% 0.36% 0.69%
% Winners 44% 59% 79% 73% 68%


Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth weakened again last week.

M2 Money Supply and S&P500 Charts


Conclusion

Weakness in the breadth indicators leads me to think the rally off the late September low was not the beginning of a new up leg, but a countertrend rally.

I expect the major averages to be lower on Friday November 27 than they were on Friday November 20.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 18 / L 16 / T 12

 


 

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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