Technical Market Report for December 12, 2015

By: Mike Burk | Sat, Dec 12, 2015
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The good news is:
• The last 9 trading days of the year, which begin next Friday have been, on average, the strongest period of the year.


The negatives

New lows finished the week at their highest levels in several months.

Retail sales have been awful, manufacturing weak, capacity utilization poor and the Fed appears determined to raise rates Wednesday. No wonder the market is having a hissy fit.

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.

NY HL Ratio at 9% is at an extreme.

NYSE 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 at 16% offers no comfort.

OTC HL ratio Chart


The positives

The market is oversold and due for a bounce and late next week we enter a seasonally strong period that lasts until the end of the year.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of December 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 by all measures.

Report for the week before the 3rd Friday of December.
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 -0.28% -0.40% 0.17% 0.09% -0.37% -0.79%
1967-3 -0.33% -0.21% 0.66% 0.59% 0.37% 1.09%
1971-3 0.32% -0.08% 0.35% 0.51% 0.46% 1.56%
 
1975-3 -0.49% 0.87% 0.81% 0.36% -0.20% 1.35%
1979-3 0.35% -0.56% -0.05% 0.41% -0.07% 0.10%
1983-3 -0.20% -0.36% -0.90% -0.39% 0.24% -1.61%
1987-3 2.25% 1.06% 2.10% 0.08% 2.32% 7.82%
1991-3 0.52% -0.74% 0.03% -0.98% 0.23% -0.95%
Avg 0.49% 0.05% 0.40% -0.10% 0.50% 1.34%
 
1995-3 -0.08% -0.89% 0.42% -1.73% -0.74% -3.03%
1999-3 1.05% -2.36% 1.41% 2.57% 1.02% 3.69%
2003-3 -1.58% 0.31% -0.15% 1.81% -0.26% 0.13%
2007-3 -2.32% 0.84% 0.19% 1.53% 1.94% 2.17%
2011-3 -1.31% -1.26% -1.55% 0.07% 0.56% -3.49%
Avg -0.85% -0.67% 0.06% 0.85% 0.50% -0.10%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg -0.16% -0.29% 0.27% 0.38% 0.42% 0.62%
Win% 38% 31% 69% 77% 62% 62%
 
OTC summary for all years 1963 - 2014
Avg -0.02% 0.08% -0.02% 0.02% 0.21% 0.26%
Win% 50% 50% 49% 60% 62% 62%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 -1.02% 0.07% -0.84% -0.02% 0.16% -1.66%
1959-3 0.27% -0.24% 0.12% -0.19% 0.48% 0.44%
1963-3 0.32% 0.59% -0.15% -0.31% -0.16% 0.30%
1967-3 -0.31% -0.12% 0.35% 0.14% -0.46% -0.41%
1971-3 0.29% -0.31% 0.89% 1.22% 0.52% 2.61%
Avg -0.09% 0.00% 0.07% 0.17% 0.11% 0.26%
 
1975-3 0.30% 0.95% 0.25% 0.31% -0.70% 1.11%
1979-3 0.38% -0.94% -0.09% 0.06% -0.62% -1.22%
1983-3 0.32% -0.42% -0.97% -1.02% 0.45% -1.64%
1987-3 2.92% 0.25% 2.17% -2.06% 2.54% 5.83%
1991-3 0.00% -0.45% 0.19% -0.25% 1.18% 0.67%
Avg 0.78% -0.12% 0.31% -0.59% 0.57% 0.95%
 
1995-3 0.33% -0.12% 0.47% -0.77% -0.09% -0.18%
1999-3 -0.13% -0.85% 0.73% 0.38% 0.16% 0.29%
2003-3 -0.57% 0.66% 0.13% 1.18% -0.05% 1.35%
2007-3 -1.50% 0.63% -0.14% 0.49% 1.67% 1.15%
2011-3 -1.49% -0.87% -1.13% 0.32% 0.32% -2.85%
Avg -0.67% -0.11% 0.01% 0.32% 0.40% -0.05%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg 0.01% -0.08% 0.13% -0.03% 0.36% 0.39%
Win% 53% 40% 60% 53% 60% 60%
 
SPX summary for all years 1953 - 2014
Avg 0.04% 0.16% 0.07% 0.01% 0.18% 0.46%
Win% 56% 49% 52% 48% 61% 63%


Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply is collapsing with the equity market.

S&P500 and M2 Money Supply Charts


Conclusion

Upcoming seasonal strength is about the only visible positive.

I expect the major averages to be lower on Friday December 18 than they were on Friday December 1.

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Good Luck,

YTD W 19 / L 16 / T 14

 


 

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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