Technical Market Report for December 26, 2015

By: Mike Burk | Sat, Dec 26, 2015
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The good news is:
• The market has been following the average seasonal pattern which remains positive.


The negatives

The numbers do not mean much. This is the time of the year when the market usually drifts upward on low volume and that is what it has been doing.

Considering how close the blue chip indices are to their all time highs, there has been a shortage of new highs.

The chart below covers the past 6 months showing the S&P 500 (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.

The SPX is only 3.2% off its all time high yet NY NH is closer to its recent low than its recent high.

SPX and NY NH Chart

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

The patterns are similar.

OTC and OTC NH Chart


The positives

New lows disappeared last week.

NYSE new lows fell from 228 on Friday December 18 to 5 last Thursday while NASDAQ new lows declined from 156 to 39 over the same period.

The chart below 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 shot up into positive territory last week.

SPX and 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 also moved sharply upward, but not as dramatically as NY HL Ratio.

OITC and OTC HL Ratio Chart


Seasonality

Next week includes the last 4 trading days of 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 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 strong by all measures but returns were negative in the last 2 periods.

Report includes the last 4 days of December.
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 0.20% 4 0.83% 5 0.34% 1 0.96% 2 2.34%
1967-3 -0.17% 2 0.08% 3 -0.05% 4 -0.16% 5 -0.30%
1971-3 0.21% 2 0.57% 3 0.36% 4 1.02% 5 2.15%
 
1975-3 1.00% 5 -0.25% 1 -0.35% 2 1.24% 3 1.64%
1979-3 0.03% 3 0.15% 4 0.40% 5 0.21% 1 0.78%
1983-3 0.05% 2 -0.04% 3 0.18% 4 0.56% 5 0.74%
1987-3 -2.28% 1 -0.02% 2 1.28% 3 0.23% 4 -0.78%
1991-3 1.77% 4 1.14% 5 2.48% 1 1.14% 2 6.54%
Avg 0.11% 0.20% 0.80% 0.67% 1.78%
 
1995-3 0.24% 2 -0.12% 3 -0.56% 4 0.95% 5 0.50%
1999-3 -0.08% 2 1.75% 3 -0.11% 4 0.80% 5 2.35%
2003-3 0.20% 5 1.69% 1 0.17% 2 -0.32% 3 1.73%
2007-3 0.40% 3 -1.75% 4 -0.09% 5 -0.83% 1 -2.26%
2011-3 0.25% 2 -1.34% 3 0.92% 4 -0.33% 5 -0.50%
Avg 0.20% 0.04% 0.06% 0.05% 0.36%
 
OTC summary for Presidential Year 3 1963 - 2011
Averages 0.14% 0.21% 0.38% 0.42% 1.15%
% Winners 77% 54% 62% 69% 69%
 
OTC summary for all years 1963 - 2014
Averages 0.19% 0.08% 0.25% 0.30% 0.84%
% Winners 69% 49% 63% 73% 71%
 
SPX Presidential Year 3
  Day4 Day3 Day2 Day1 Totals
1931-3 -2.51% 1 2.58% 2 1.76% 3 0.25% 4 2.07%
 
1935-3 -0.08% 5 -0.61% 6 2.07% 1 0.98% 2 2.36%
1939-3 -0.57% 3 0.89% 4 0.32% 5 0.24% 6 0.89%
1943-3 -0.95% 2 0.00% 3 1.83% 4 -0.17% 5 0.71%
1949-3 -0.13% 6 -0.40% 1 1.20% 2 0.53% 3 1.19%
1951-3 0.90% 4 0.17% 5 0.00% 6 0.34% 1 1.40%
Avg -0.17% 0.01% 1.08% 0.38% 1.31%
 
1955-3 -0.62% 2 -0.38% 3 0.22% 4 0.73% 5 -0.04%
1959-3 -0.03% 1 0.54% 2 0.79% 3 0.20% 4 1.50%
1963-3 0.47% 4 0.16% 5 0.16% 1 0.62% 2 1.41%
1967-3 0.06% 2 0.68% 3 -0.02% 4 0.60% 5 1.33%
1971-3 0.99% 2 0.26% 3 -0.42% 4 0.30% 5 1.13%
Avg 0.18% 0.25% 0.15% 0.49% 1.07
 
1975-3 0.88% 5 -0.13% 1 -0.40% 2 0.47% 3 0.82%
1979-3 0.11% 3 0.17% 4 -0.11% 5 0.09% 1 0.26%
1983-3 0.94% 2 0.35% 3 -0.29% 4 0.04% 5 1.05%
1987-3 -2.56% 1 -0.40% 2 1.34% 3 -0.31% 4 -1.94%
1991-3 1.38% 4 0.40% 5 2.14% 1 0.47% 2 4.39%
Avg 0.15% 0.08% 0.53% 0.15% 0.92%
 
1995-3 0.38% 2 0.04% 3 -0.07% 4 0.29% 5 0.65%
1999-3 0.04% 2 0.40% 3 0.07% 4 0.33% 5 0.84%
2003-3 0.17% 5 1.24% 1 0.01% 2 0.21% 3 1.63%
2007-3 0.08% 3 -1.42% 4 0.14% 5 -0.69% 1 -1.88%
2011-3 0.01% 2 -1.25% 3 1.07% 4 -0.43% 5 -0.60%
Avg 0.14% -0.20% 0.25% -0.06% 0.13%
 
SPX summary for Presidential Year 3 1931 - 2011
Averages -0.05% 0.16% 0.56% 0.24% 0.91%
% Winners 62% 62% 67% 81% 81%
 
SPX summary for all years 1928 - 2014
Averages 0.13% 0.28% 0.45% 0.19% 1.03%
% Winners 64% 58% 72% 64% 76%


Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth increased along with the equity market.

M2 Money Supply and S&P500 Charts


Conclusion

Seasonal factors are all that matter.

I expect the major averages to be higher on Thursday December 31 than they were on Thursday December 24.

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Good Luck,

YTD W 21 / 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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