Technical Market Report for April 2, 2016

By: Mike Burk | Sat, Apr 2, 2016
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The good news is:
• New lows declined to insignificant levels and the secondaries have been outperforming the blue chips.


The Negatives

The market is overbought.

The chart below covers the past 34 trading days showing the major indices on log scales. Dashed vertical lines have been drawn on the 1st trading day of each week. The first line in the legend shows the symbol followed by the current percentage change from the starting date followed by the range of changes which have all been up. The second line begins with maximum drawdown (MDD) and the date it occurred. CAR is compound annual return. If the market were to continue to advance at the same rate for an entire year this is what the return would be.

Last 34 Trading Days Performance


The positives

New highs picked up significantly last week.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red. 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.

After dancing around the neutral line for several weeks OTC HL Ratio shot up and finished the week at a strong 70%.

OTC and OTC HL Ratio Chart

The next chart below is similar to the one above except it shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio finished the week at a very strong 94%.

SPX and NY HL Ratio Chart

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs in green.

OTC NH rose sharply last week.

OTC and OTC NH Chart

The next chart is similar to the one above except is shows the SPX in red and NY NH, in green has been calculated from NYSE data.

NY NH rose to its highest level in a year.

SPX and NY NH Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of April 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.

This week in 2000 was one of the worst weeks in market history.

Report for the week before the 2nd Friday of April.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.37% 0.47% -0.31% 0.50% 0.08% 1.10%
1968-4 1.66% 1.09% 0.19% 1.00% -0.55% 3.40%
1972-4 -0.03% 0.54% 0.53% -0.08% 0.62% 1.57%
 
1976-4 0.88% 0.13% -0.82% -0.84% -1.28% -1.92%
1980-4 -0.78% -0.20% -0.46% -0.89% 0.08% -2.26%
1984-4 -0.45% 0.25% -0.68% 0.32% 0.60% 0.03%
1988-4 0.18% 0.22% 0.01% -2.32% -0.17% -2.07%
1992-4 1.06% -2.46% -1.36% 2.28% -0.43% -0.91%
Avg 0.18% -0.41% -0.66% -0.29% -0.24% -1.43%
 
1996-4 0.86% 1.31% -0.36% 1.37% 0.21% 3.40%
2000-4 -5.81% -3.16% -7.06% -2.46% -9.67% -28.16%
2004-4 0.61% -1.71% -0.26% -1.12% -0.32% -2.80%
2008-4 -0.26% -0.68% -1.13% 1.27% -2.61% -3.41%
2012-4 -0.76% 1.82% -0.37% -0.79% -0.24% -0.34%
Avg -1.07% -0.49% -1.84% -0.34% -2.53% -6.26%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.19% -0.18% -0.93% -0.14% -1.05% -2.49%
Win% 54% 62% 23% 46% 38% 38%
 
OTC summary for all years 1963 - 2015
Avg -0.02% -0.02% -0.01% 0.13% -0.31% -0.22%
Win% 58% 55% 57% 55% 51% 58%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.49% -1.40% 0.79% -0.60% -0.15% -1.84%
1960-4 0.20% 0.59% 1.15% 0.02% -0.23% 1.73%
1964-4 0.10% -0.35% 0.01% -0.06% 0.19% -0.11%
1968-4 0.06% 0.03% 0.20% 0.28% -1.27% -0.70%
1972-4 -0.16% 0.28% 0.38% -0.25% -0.06% 0.20%
Avg -0.06% -0.17% 0.51% -0.12% -0.30% -0.15%
 
1976-4 1.23% -0.14% -1.11% -0.91% -0.92% -1.85%
1980-4 -0.92% -0.20% -1.06% -0.48% -0.49% -3.16%
1984-4 -0.02% 0.27% -0.56% 1.76% -0.27% 1.19%
1988-4 0.27% 0.45% 0.07% -4.35% 0.01% -3.55%
1992-4 1.01% -1.86% -0.89% 1.56% 0.91% 0.72%
Avg 0.31% -0.30% -0.71% -0.49% -0.15% -1.33%
 
1996-4 0.91% 0.39% -0.53% 0.31% 0.23% 1.31%
2000-4 -0.78% -0.26% -2.23% -1.82% -5.78% -10.87%
2004-4 0.52% -1.38% -0.11% 0.06% 0.51% -0.40%
2008-4 0.16% -0.51% -0.81% 0.45% -2.04% -2.75%
2012-4 -0.05% 1.55% -0.41% -0.59% 0.12% 0.62%
Avg 0.15% -0.04% -0.82% -0.32% -1.39% -2.42%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg 0.14% -0.17% -0.34% -0.31% -0.62% -1.30%
Win% 60% 47% 40% 47% 40% 40%
 
SPX summary for all years 1953 - 2015
Avg 0.13% 0.10% 0.08% -0.03% -0.11% 0.17%
Win% 60% 57% 57% 52% 51% 56%


Conclusion

The breadth indicators were all strong last week. NYSE new highs hit their highest levels in nearly a year and the NYSE AD line reached its all time high of about a year ago. NASDAQ breadth indicators improved, but continued to underperform the NYSE breadth indicators. This is the anniversary of one of the worst weeks in market history, April 2000. Technical conditions compared to that period are not similar.

I expect the major averages to be higher on Friday April 8 than they were on Friday April 1.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 7 / L 6 / 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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