Technical Market Report for May 21, 2016

By: Mike Burk | Sat, May 21, 2016
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The good news is:
• NYSE new lows remained at non threatening levels.


The Negatives

NYSE new highs collapsed last week after hitting sensational levels the week before. NASDAQ new highs have been weak for a long time.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH fell sharply last week.

SPX and NY NH Chart

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

OTC NH headed downward from a much lower level.

OTC and OTC NH Chart

The next chart shows the 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 fell deeper into negative territory last week.

OTC and OTC HL Ratio Chart


The positives

Last week the secondaries were a little stronger than the blue chips and, for most of the week NYSE new highs outnumbered new lows.

The 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 sharply last week, but finished the week in positive territory.

SPX and NY HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to Memorial Day during the 4th year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period. The Uniform Monday Holiday Act changed Memorial Day from the last day of May to the last Monday in May in 1971.

OTC data covers the period from 1971 to 2015 while SPX data runs from 1971 to 2015. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Data prior to 1971 has been ignored.

Average returns have been mixed, but mostly positive.

Report for the 5 trading days before Memorial Day
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1972-4 0.17% 1 0.26% 2 0.57% 3 0.25% 4 0.11% 5 1.35%
 
1976-4 -1.39% 1 -0.39% 2 0.33% 3 -0.36% 4 0.30% 5 -1.51%
1980-4 0.00% 1 -0.21% 2 -0.12% 3 0.82% 4 1.03% 5 1.52%
1984-4 -0.60% 1 -0.97% 2 -0.51% 3 -1.75% 4 -0.07% 5 -3.89%
1988-4 -0.76% 1 0.52% 2 0.16% 3 0.43% 4 -0.17% 5 0.18%
1992-4 0.37% 1 0.26% 2 0.39% 3 -0.21% 4 0.21% 5 1.02%
Avg -0.48% -0.16% 0.05% -0.21% 0.26% -0.54%
 
1996-4 0.50% 1 -0.30% 2 0.24% 3 0.10% 4 -0.07% 5 0.48%
2000-4 -0.77% 1 -5.93% 2 3.35% 3 -1.99% 4 -0.01% 5 -5.36%
2004-4 0.57% 1 2.17% 2 0.59% 3 0.42% 4 0.11% 5 3.86%
2008-4 -0.50% 1 -0.95% 2 -1.77% 3 0.67% 4 -0.81% 5 -3.36%
2012-4 2.46% 1 -0.29% 2 0.39% 3 -0.38% 4 -0.07% 5 2.12%
Avg 0.45% -1.06% 0.56% -0.24% -0.17% -0.45%
 
OTC summary for Presidential Year 4 1972 - 2012
Averages 0.00% -0.53% 0.33% -0.18% 0.05% -0.33%
%Winners 45% 36% 73% 55% 45% 64%
MDD 5/23/2000 6.66% -- 5/25/1984 3.83% -- 5/23/2008 3.33%
 
OTC summary for all years 1971 - 2015
Averages -0.11% -0.19% 0.04% 0.25% 0.13% 0.11%
% Winners 45% 44% 58% 60% 58% 62%
 
SPX Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1972-4 0.65% 1 0.08% 2 0.48% 3 0.14% 4 0.18% 5 1.53%
 
1976-4 -1.80% 1 0.05% 2 -0.15% 3 0.04% 4 0.80% 5 -1.05%
1980-4 0.30% 1 -0.05% 2 0.09% 3 1.20% 4 1.48% 5 3.02%
1984-4 -0.67% 1 -0.55% 2 -0.47% 3 -1.25% 4 0.26% 5 -2.69%
1988-4 -0.87% 1 1.07% 2 0.10% 3 0.34% 4 -0.48% 5 0.17%
1992-4 0.66% 1 0.86% 2 -0.24% 3 -0.67% 4 0.34% 5 0.96%
Avg -0.47% 0.28% -0.13% -0.07% 0.48% 0.08%
 
1996-4 0.63% 1 -0.06% 2 0.84% 3 -0.36% 4 0.37% 5 1.43%
2000-4 -0.45% 1 -1.91% 2 1.83% 3 -1.26% 4 -0.25% 5 -2.04%
2004-4 0.17% 1 1.61% 2 0.17% 3 0.57% 4 -0.05% 5 2.46%
2008-4 0.09% 1 -0.93% 2 -1.61% 3 0.26% 4 -1.32% 5 -3.50%
2012-4 1.60% 1 0.05% 2 0.17% 3 0.14% 4 -0.22% 5 1.74%
Avg 0.41% -0.25% 0.28% -0.13% -0.29% 0.02%
 
SPX summary for Presidential Year 4 1972 - 2012
Averages 0.03% 0.02% 0.11% -0.08% 0.10% 0.19%
%Winners 64% 55% 64% 64% 55% 64%
MDD 5/28/1956 4.11% -- 5/23/2008 3.55% -- 5/24/1984 2.91%
 
SPX summary for all years 1971 - 2015
Averages -0.01% -0.08% -0.05% 0.13% 0.09% 0.07%
% Winners 56% 47% 51% 56% 56% 60%


Conclusion

Most of the breadth indicators deteriorated last week and Seasonality for the coming week is mixed.

I expect the major averages to be lower on Friday May 27 than they were on Friday May 20.

Last week the DJIA was down slightly while the other major indices were up slightly so I am calling last week's negative forecast a tie.

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Good Luck,

YTD W 9 / L 9 / T 2

 


 

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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