Technical Market Report for February 20, 2016

By: Mike Burk | Sat, Feb 20, 2016
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The good news is:
• Last week new lows nearly disappeared again.


The Negatives

In late January new lows all but disappeared returning a couple weeks later. They disappeared again last week. If the pattern repeats we should see another week of non threatening levels of new lows and rising prices.

The first chart 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 made it nearly to the neutral line last week.

SPX and 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 reached its highest level in over a month, but finished the week at a very negative 23%.

OTC and OTC HL Ratio Chart

The next chart 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.

NY NH fell from a low level while the SPX rose last week.

SPX and NY NH Chart

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

OTC NH continued to show no sighs of life.

OTC and OTC NH Chart


The positives

New lows declined to mid double digits last week from mid triple digits the week before.

The chart below covers the past 6 months showing the 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).

NY NL is showing a nice pattern of higher highs and higher lows.

SPX and NY NL Chart

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

OTC NL is showing a similar pattern to NY NL.

OTC and OTC NL Chart


Seasonality

Next week includes the 5 trading days prior to the 4th Friday of February 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 2015 while SPX data runs from 1953 to 2015. 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 stronger during the 4th year of the Presidential Cycle than other years.

Report for the week before the 4th Friday of February.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1968-4 0.24% 0.37% 0.44% 0.00% 0.57% 1.61%
1972-4 0.00% -0.08% 0.25% 0.32% 0.67% 1.16%
 
1976-4 0.32% 0.46% 0.39% -0.69% -1.30% -0.83%
1980-4 0.00% -0.92% 0.65% -0.49% -0.76% -1.53%
1984-4 0.00% -0.55% -0.32% -0.83% 1.76% 0.06%
1988-4 0.80% 0.31% 0.57% 0.13% -0.06% 1.75%
1992-4 -0.77% -0.56% 1.77% 0.25% -0.08% 0.61%
Avg 0.12% -0.25% 0.61% -0.33% -0.09% 0.01%
 
1996-4 0.00% -0.69% 1.26% 1.84% 0.06% 2.48%
2000-4 0.00% -0.67% 3.84% 1.48% -0.59% 4.06%
2004-4 -1.49% -0.10% 0.87% 0.47% -0.14% -0.38%
2008-4 0.00% -0.67% 0.91% -1.17% 0.16% -0.78%
2012-4 0.00% -0.11% -0.52% 0.81% 0.23% 0.41%
Avg -1.49% -0.45% 1.27% 0.69% -0.06% 1.16%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.18% -0.27% 0.84% 0.19% 0.04% 0.72%
Win% 60% 25% 83% 64% 50% 67%
 
OTC summary for all years 1963 - 2015
Avg -0.22% -0.28% 0.17% 0.05% 0.09% -0.06%
Win% 45% 39% 63% 63% 54% 58%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.16% 0.25% 0.00% 0.88% 0.82% 1.79%
Avg -0.16% 0.25% 0.00% 0.88% 0.82% 1.79%
 
1960-4 0.00% -0.53% -0.36% 0.34% 0.41% -0.14%
1964-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1968-4 0.39% 0.58% 0.45% 0.00% -0.38% 1.03%
1972-4 0.00% 0.01% 0.09% 0.07% 0.69% 0.85%
1976-4 -0.48% 0.41% -0.33% -1.55% -0.40% -2.35%
Avg -0.05% 0.12% -0.04% -0.38% 0.08% -0.15%
 
1980-4 0.00% -0.70% 1.63% -1.02% -0.21% -0.30%
1984-4 0.00% -0.71% -0.21% -0.01% 2.09% 1.15%
1988-4 1.54% -0.23% -0.22% -1.08% 0.34% 0.34%
1992-4 0.20% -0.44% 1.19% -0.36% -0.28% 0.31%
1996-4 0.00% -1.13% 1.16% 1.66% 0.03% 1.73%
Avg 0.87% -0.64% 0.71% -0.16% 0.39% 0.65%
 
2000-4 0.00% 0.45% 0.63% -0.54% -1.48% -0.93%
2004-4 -0.27% -0.17% 0.40% 0.11% 0.00% 0.07%
2008-4 0.00% -0.09% 0.83% -1.29% 0.79% 0.25%
2012-4 0.00% 0.07% -0.33% 0.43% 0.17% 0.33%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg 0.20% -0.16% 0.38% -0.18% 0.19% 0.30%
Win% 50% 43% 62% 46% 64% 71%
 
SPX summary for all years 1953 - 2015
Avg -0.20% -0.16% 0.15% -0.08% 0.10% -0.09%
Win% 37% 43% 51% 46% 61% 46%


Money supply (M2)

The charts were provided by Gordon Harms. Money supply growth tumbled last week.

S&P500 and M2 Money Supply Charts


Conclusion

Last weeks rally was spectacular, new lows disappeared and the secondaries led the way up. You do not expect much from new highs coming off a bottom, but they declined on the NYSE last week. I believe we are seeing a bear market rally that could continue for a few more weeks.

I expect the major averages to be higher on Friday February 26 than they were on Friday February 19.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 4 / L 3 / 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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