Technical Market Report for May 7, 2016

By: Mike Burk | Sat, May 7, 2016
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The good news is:
• New highs on the NYSE increased last week in spite of another rough week for the major indices.


The Negatives

There have been very few new highs on the NASDAQ for a long time. It is a different story on the NYSE, however, nearly all of the new highs on the NYSE are interest rate sensitive issues. With 10yr. treasuries yielding 1.77%, yields are hard to find.

Looking over the sectors, most of them deteriorated badly last week. The exceptions were precious metals, utilities, consumer products and financials. While reviewing the sectors I was reminded of the old saying "Sell in May and go away."

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.

OTC HL Ratio fell into negative territory last week.

OTC and OTC HL Ratio Chart


The positives

New lows picked up a little last week, but remained below threatening levels while new highs were strong on the NYSE and weak on the NASDAQ.

The next chart below is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio fell last week, but finished the week at a very strong 85%.

SPX and NY 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 finished the week at its highest level in over a year.

SPX and NY NH Chart

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

This is not a positive looking chart. I included it to show the contrast between what was happening on the NYSE and the NASDAQ.

OTC and OTC NH Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of May 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 have been modestly negative by all measures for the coming week.

Report for the week before the 2nd Friday of May.
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 0.85% -0.36% 0.59% 0.25% 0.18% 1.51%
1968-4 0.09% 0.18% 0.53% 0.26% -0.56% 0.51%
1972-4 -0.63% -2.21% 0.79% 0.93% 1.16% 0.05%
 
1976-4 0.59% 0.04% 0.06% -0.46% -0.49% -0.26%
1980-4 0.56% 0.84% 0.95% -0.22% -0.14% 1.99%
1984-4 0.18% 0.43% 0.07% 0.12% -0.93% -0.12%
1988-4 -0.83% -0.22% -1.65% 0.27% 0.61% -1.83%
1992-4 0.93% 0.78% 0.22% -0.37% -0.24% 1.32%
Avg 0.29% 0.37% -0.07% -0.13% -0.24% 0.22%
 
1996-4 0.14% -0.30% 0.06% 0.37% 1.26% 1.53%
2000-4 -3.86% -2.30% -5.59% 3.39% 0.84% -7.51%
2004-4 -1.14% 1.86% -0.30% 0.02% -1.13% -0.69%
2008-4 -0.52% 0.78% -1.80% 0.52% -0.23% -1.26%
2012-4 0.05% -0.39% -0.39% -0.04% 0.01% -0.76%
Avg -1.07% -0.07% -1.60% 0.86% 0.15% -1.74%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.27% -0.07% -0.50% 0.39% 0.03% -0.42%
Win% 62% 54% 62% 69% 46% 46%
 
OTC summary for all years 1963 - 2015
Avg 0.07% -0.14% -0.03% -0.08% 0.09% -0.09%
Win% 57% 49% 51% 57% 60% 53%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.60% -0.41% -0.17% -1.63% -0.08% -2.89%
1960-4 0.09% -0.69% 0.28% 0.51% 0.82% 1.01%
1964-4 0.37% 0.51% 0.22% 0.11% -0.18% 1.03%
1968-4 -0.31% 0.56% 0.01% -0.53% 0.11% -0.16%
1972-4 -0.46% -1.32% 0.65% 0.33% 0.58% -0.22%
Avg -0.18% -0.27% 0.20% -0.24% 0.25% -0.25%
 
1976-4 1.20% -0.15% -0.17% -0.59% -0.80% -0.52%
1980-4 0.76% -0.12% 0.88% -0.98% -1.33% -0.80%
1984-4 0.23% 0.66% -0.26% -0.07% -0.94% -0.38%
1988-4 -0.37% 0.42% -1.67% 0.21% 1.15% -0.25%
1992-4 1.06% -0.02% -0.01% -0.23% 0.05% 0.86%
Avg 0.58% 0.16% -0.25% -0.33% -0.37% -0.22%
 
1996-4 -0.13% -0.40% 1.02% 0.10% 1.03% 1.63%
2000-4 -0.59% -0.85% -2.05% 1.79% 0.94% -0.77%
2004-4 -1.05% 0.77% 0.17% -0.08% -0.07% -0.26%
2008-4 -0.45% 0.77% -1.81% 0.37% -0.67% -1.81%
2012-4 0.04% -0.43% -0.67% 0.25% -0.34% -1.15%
Avg -0.44% -0.03% -0.67% 0.49% 0.18% -0.47%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.01% -0.05% -0.24% -0.03% 0.02% -0.31%
Win% 47% 40% 47% 53% 47% 27%
 
SPX summary for all years 1953 - 2015
Avg 0.02% -0.03% -0.01% -0.14% 0.05% -0.11%
Win% 45% 46% 52% 48% 55% 43%


Conclusion

The breadth indicators deteriorated last week and seasonality for the coming week has been weak.

I expect the major averages to be lower on Friday May 13 than they were on Friday May 6.

Last weeks positive forecast was a miss.

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Good Luck,

YTD W 8 / L 9 / T 1

 


 

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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