Technical Market Report for January 16, 2016

By: Mike Burk | Sat, Jan 16, 2016
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The good news is:
• The declines last week were only about 1/3 of what they were the week before.


The negatives

New lows are at dangerous levels.

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 lows (NY NL) in blue. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good). Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NL is at its lowest level since March 2009 and moving downward.

SPX and NY NL Chart

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

OTC NL looks a little worse then NY NL and is also at its lowest level since 2009.

OTC and OTC NL 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.

At 2.3% NY HL Ratio is about as low as it can go.

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 is also about as low as it can go.

OTC and OTC HL Ratio Chart


The positives

It will be easy to identify when this period of weakness is over. New lows will quickly disappear.


Seasonality

Next Friday is the 4th Friday of the month, but since the 1st Friday was a holiday, I am showing the report which includes the 5 trading days prior to the 3rd Friday of January during the 4th 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 4th 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 mixed.

Checking seasonality now is like checking the weather during an earth quake.

Report for the week before the 3rd Friday of January.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 -0.19% 0.14% 0.38% 0.14% -0.22% 0.25%
1968-4 0.43% 0.18% -0.85% 0.36% 0.16% 0.28%
1972-4 0.16% 0.62% -0.18% -0.11% -0.09% 0.40%
1976-4 0.49% -1.56% 2.70% 0.13% 0.68% 2.44%
 
1980-4 0.34% 0.36% 0.66% -0.12% 0.21% 1.47%
1984-4 -0.20% 0.20% 0.12% -0.25% -0.73% -0.85%
1988-4 0.11% -0.05% -1.96% 0.17% 1.00% -0.73%
1992-4 0.31% 1.31% 0.81% -0.55% -0.08% 1.81%
1996-4 -1.95% 0.74% 0.24% 0.89% 1.12% 1.05%
Avg -0.27% 0.51% -0.02% 0.03% 0.31% 0.55%
 
2000-4 0.00% 1.64% 0.50% 0.92% 1.10% 4.15%
2004-4 1.19% -0.73% 0.70% -0.10% 1.49% 2.56%
2008-4 1.57% -2.45% -0.95% -1.99% -0.29% -4.11%
2012-4 0.00% 0.64% 1.53% 0.67% -0.06% 2.78%
2016-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Avg 1.38% -0.22% 0.44% -0.12% 0.56% 1.34%
 
OTC summary for Presidential Year 4 1964 - 2016
Avg 0.21% 0.08% 0.28% 0.01% 0.33% 0.88%
Win% 73% 69% 69% 54% 54% 77%
 
OTC summary for all years 1963 - 2015
Avg -0.03% 0.25% 0.03% 0.22% 0.00% 0.48%
Win% 58% 60% 58% 66% 57% 68%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -1.19% 0.75% -0.67% -1.02% -1.14% -3.28%
 
1960-4 -0.84% -1.07% -0.35% 0.25% 0.30% -1.72%
1964-4 -0.03% 0.18% 0.37% -0.12% 0.01% 0.42%
1968-4 -0.31% -0.62% -0.19% -0.08% -0.33% -1.54%
1972-4 0.30% 0.34% -0.16% 0.00% -0.22% 0.25%
1976-4 1.45% -0.79% 1.63% -0.54% 0.40% 2.17%
Avg 0.12% -0.39% 0.26% -0.12% 0.03% -0.08%
 
1980-4 0.42% 0.69% -0.08% -0.32% 0.33% 1.05%
1984-4 0.10% 0.39% -0.17% -0.30% -0.50% -0.48%
1988-4 -0.07% -1.02% -2.68% 0.21% 1.38% -2.17%
1992-4 -0.18% 1.47% 0.08% -0.61% 0.16% 0.91%
1996-4 -0.33% 1.44% -0.34% 0.31% 0.59% 1.66%
Avg -0.01% 0.59% -0.64% -0.14% 0.39% 0.19%
 
2000-4 0.00% -0.69% 0.05% -0.71% -0.29% -1.63%
2004-4 0.48% -0.53% 0.83% 0.14% 0.69% 1.60%
2008-4 1.09% -2.49% -0.56% -2.91% -0.60% -5.48%
2012-4 0.00% 0.36% 1.11% 0.49% 0.07% 2.03%
2016-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Avg 0.78% -0.84% 0.36% -0.75% -0.04% -0.87%
 
SPX summary for Presidential Year 4 1956 - 2016
Avg 0.07% -0.11% -0.08% -0.37% 0.06% -0.41%
Win% 46% 53% 40% 36% 60% 53%
 
SPX summary for all years 1953 - 2015
Avg -0.09% 0.12% -0.05% 0.04% -0.09% -0.06%
Win% 43% 60% 54% 58% 54% 49%


Money supply (M2) & Yield curve

The charts were provided by Gordon Harms. Money supply growth declined a bit.

M2 Money Supply and S&P500 Daily Chart


Conclusion

The market remains in free fall.

New lows are the only measure that matters and they will quickly disappear when this period of weakness ends.

I expect the major averages to be lower on Friday January 22 than they were on Friday January 15.

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Good Luck,

YTD W 2 / L 0 / T 0

 


 

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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