Technical Market Report for April 9, 2016

By: Mike Burk | Sat, Apr 9, 2016
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The good news is:
• New lows remained at insignificant levels.


The Negatives

NASDAQ breadth indicators continue to underperform NYSE breadth indicators.

The first chart covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

If this were a new bull market rather than a bear market rally OTC NH would be leading the way upward.

OTC and OTC NH 6-Month Chart

The next chart is similar to the one above except it covers the past year. OTC NH has been deteriorating for quite a while.

OTC and OTC NH 1-Year Chart

The next chart is similar to the first chart except it shows the S&P 500 (SPX) in red and NY NH, in green has been calculated from NYSE data.

The NYSE has a lot more interest rate sensitive issues than the NASDAQ and the yield on 10 yr treasuries has fallen to around 1.7%. NY NH makes it look like we are in a new bull market.

SPX and NY NH 6-Month Chart

The next chart is similar to the one above except it covers the past year.

NY NH looks good here, leading the way upward. There are a lot of Muni bond funds on the NYSE new high list.

SPX and NY NH 1-Year Chart


The positives

New lows have disappeared.

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 horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

OTC HL Ratio held above the neutral level.

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 declined a little last week, but finished the week at a very strong 89%.

SPX and NY HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd 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.

The coming week has been strong by all measures and stronger during the 4th year of the Presidential Cycle than other times.

Report for the week before the 3rd Friday of April.
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 0.00% 0.23% 0.26% 0.31% 0.39% 1.19%
1968-4 0.13% -0.17% 0.25% 0.95% 1.87% 3.05%
1972-4 -0.10% 0.27% -1.06% 0.14% 0.11% -0.65%
 
1976-4 0.47% 1.14% 0.18% 0.21% -0.40% 1.60%
1980-4 -1.17% 1.98% 0.89% 1.29% -0.56% 2.43%
1984-4 -0.64% 0.05% -0.07% 0.83% 0.39% 0.57%
1988-4 0.32% 0.47% -0.70% -0.28% 0.23% 0.04%
1992-4 -2.47% -0.37% 0.55% -0.38% -0.55% -3.21%
Avg -0.70% 0.65% 0.17% 0.34% -0.18% 0.29%
 
1996-4 1.30% 1.15% 0.86% 0.63% 0.23% 4.17%
2000-4 -4.43% 6.57% -2.19% 3.96% 2.30% 6.21%
2004-4 1.24% -2.07% 0.86% 1.87% 0.83% 2.72%
2008-4 -0.63% 0.45% 2.80% -0.35% 2.61% 4.88%
2012-4 -1.00% -0.30% 2.30% 0.69% 0.61% 2.30%
Avg -0.70% 1.16% 0.93% 1.36% 1.31% 4.06%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.58% 0.72% 0.38% 0.76% 0.62% 1.95%
Win% 42% 69% 69% 77% 77% 85%
 
OTC summary for all years 1963 - 2015
Avg -0.39% 0.31% 0.25% 0.26% 0.15% 0.58%
Win% 46% 58% 70% 64% 64% 68%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 0.02% -0.06% -0.40% -0.36% 0.40% -0.39%
1960-4 0.28% -0.81% -1.23% 0.27% -0.31% -1.79%
1964-4 -0.10% 0.28% 0.13% 0.14% 0.44% 0.87%
1968-4 -0.55% 1.22% 0.15% 0.31% 0.30% 1.42%
1972-4 -0.30% 0.24% -0.52% -0.15% -0.14% -0.87%
Avg -0.13% 0.17% -0.37% 0.04% 0.14% -0.15%
 
1976-4 0.76% 1.41% 0.44% -0.33% -0.67% 1.61%
1980-4 -0.75% 3.64% 0.29% 0.65% 0.73% 4.56%
1984-4 -0.77% 0.81% 0.37% 1.04% -0.26% 1.19%
1988-4 -0.22% -0.50% -0.69% 0.11% 1.45% 0.16%
1992-4 -1.42% 0.02% -0.11% 0.44% -0.63% -1.69%
Avg -0.48% 1.08% 0.06% 0.38% 0.13% 1.16%
 
1996-4 0.44% 0.57% -0.22% 0.42% 0.09% 1.30%
2000-4 -0.32% 3.30% -1.09% 0.27% -0.85% 1.30%
2004-4 0.11% -1.56% 0.53% 1.41% 0.06% 0.55%
2008-4 -0.34% 0.46% 2.27% 0.06% 1.81% 4.27%
2012-4 -0.84% 0.37% 1.36% 0.67% 0.24% 1.80%
Avg -0.19% 0.63% 0.57% 0.56% 0.27% 1.84%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.27% 0.63% 0.08% 0.33% 0.18% 0.95%
Win% 33% 73% 53% 80% 60% 73%
 
SPX summary for all years 1953 - 2015
Avg -0.15% 0.30% 0.07% 0.12% -0.03% 0.31%
Win% 48% 54% 58% 63% 51% 65%


Conclusion

The dichotomy between NYSE and NASDAQ breadth indicators continues. I consider the NASDAQ breadth indicators more important because they are not "contaminated" with the high percentage of interest rate sensitive issues that the NYSE is. As it sits right now the NASDAQ breadth indicators are mediocre while the NYSE breadth indicators are sensational. And, next week seasonality is strong.

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

Last weeks positive forecast was a miss.

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Good Luck,

YTD W 7 / L 7 / 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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