Technical Market Report for May 28, 2016

By: Mike Burk | Sat, May 28, 2016
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The good news is:
• The market turned sharply upward last week. New lows declined sharply on both the NYSE and NASDAQ and the secondaries were stronger than the blue chips.


The Negatives

As far as new highs and new lows are concerned, the NASDAQ and NYSE have been out of synch for quite a while. Last week new lows declined on both exchanges while new highs picked up on the NASDAQ but were a bit weaker on the NYSE.

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 continued falling in spite of the sharp rally in the SPX.

SPX and NY NH Chart


The positives

New lows all but disappeared last week.

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 turned sharply upward last week.

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 reversed itself moving to comfortably positive territory.

OTC and OTC HL Ratio Chart

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 went from sharply falling the week before to sharply rising last week.

SPX and NY HL Ratio Chart


Seasonality

Next week includes the last trading day of May and the 1st 3 trading days of June 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 1928 to 2015. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Average returns have been mixed, but mostly positive.

Report for the last day of May and first 3 days of June.
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
  Day1 Day1 Day2 Day3 Totals
1964-4 0.15% 4 -0.08% 1 -0.15% 2 -0.10% 3 -0.18%
1968-4 0.69% 6 0.87% 1 0.69% 2 1.06% 3 3.32%
1972-4 -0.69% 3 0.45% 4 0.29% 6 -0.58% 1 -0.53%
 
1976-4 0.30% 6 -0.26% 2 0.40% 3 0.11% 4 0.55%
1980-4 0.24% 6 -0.19% 1 -0.17% 2 0.86% 3 0.75%
1984-4 0.38% 4 1.32% 6 1.21% 1 -0.13% 2 2.78%
1988-4 1.00% 2 1.21% 3 -0.04% 4 0.59% 6 2.76%
1992-4 0.83% 6 0.52% 1 0.14% 2 0.13% 3 1.62%
Avg 0.55% 0.52% 0.31% 0.31% 1.69%
 
1996-4 0.80% 6 -0.38% 1 0.40% 2 0.44% 3 1.27%
2000-4 -1.69% 3 5.34% 4 6.45% 6 0.22% 1 10.31%
2004-4 0.11% 6 0.20% 2 -0.09% 3 -1.44% 4 -1.22%
2008-4 0.57% 6 -1.23% 1 -0.44% 2 0.91% 3 -0.19%
2012-4 -0.35% 4 -2.82% 6 0.46% 1 0.66% 2 -2.07%
Avg -0.11% 0.22% 1.35% 0.16% 1.62%
 
OTC summary for Presidential Year 4 1964 - 2012
Averages 0.18% 0.38% 0.70% 0.21% 1.47%
% Winners 77% 54% 62% 69% 62%
MDD 6/1/2012 3.17% -- 5/31/2000 1.69% -- 6/3/2008 1.67%
 
OTC summary for all years 1963 - 2015
Averages 0.23% 0.15% 0.35% 0.16% 0.88%
% Winners 66% 58% 68% 60% 66%
MDD 6/3/2002 4.25% -- 6/3/2011 3.62% -- 6/5/1967 3.52%
 
SPX Presidential Year 4
  Day1 Day1 Day2 Day3 Totals
1928-4 0.91% 4 0.35% 6 0.75% 6 -2.08% 1 -0.07%
1932-4 -7.84% 2 -1.57% 3 5.45% 4 5.39% 6 1.44%
 
1936-4 0.70% 6 -0.07% 1 0.00% 2 -0.35% 3 0.28%
1940-4 0.22% 6 -0.43% 6 -1.30% 1 1.32% 2 -0.20%
1944-4 0.65% 3 -0.32% 4 -0.08% 6 0.08% 6 0.33%
1948-4 0.06% 6 0.30% 2 0.12% 3 -0.24% 4 0.24%
1952-4 0.08% 4 -0.25% 1 -0.08% 2 0.71% 3 0.46%
Avg 0.34% -0.16% -0.27% 0.31% 0.22%
 
1956-4 0.20% 4 0.84% 6 0.59% 1 0.02% 2 1.65%
1960-4 0.16% 2 0.11% 3 0.43% 4 0.18% 6 0.88%
1964-4 0.14% 4 -0.32% 1 -0.51% 2 -0.26% 3 -0.96%
1968-4 0.78% 6 1.33% 1 0.39% 2 -0.49% 3 2.01%
1972-4 -0.74% 3 0.15% 4 0.04% 6 -0.83% 1 -1.39%
Avg 0.11% 0.42% 0.19% -0.28% 0.44%
 
1976-4 0.80% 6 -0.33% 2 0.37% 3 -0.09% 4 0.76%
1980-4 0.88% 6 -0.43% 1 -0.23% 2 1.90% 3 2.12%
1984-4 0.13% 4 1.79% 6 0.72% 1 -0.45% 2 2.19%
1988-4 3.45% 2 1.73% 3 -0.51% 4 0.42% 6 5.09%
1992-4 -0.33% 6 0.47% 1 -0.91% 2 0.26% 3 -0.51%
Avg 0.99% 0.64% -0.11% 0.41% 1.93%
 
1996-4 -0.38% 6 -0.22% 1 0.73% 2 0.87% 3 1.01%
2000-4 -0.13% 3 1.99% 4 1.97% 6 -0.66% 1 3.16%
2004-4 -0.05% 6 0.05% 2 0.34% 3 -0.74% 4 -0.41%
2008-4 0.15% 6 -1.05% 1 -0.58% 2 -0.03% 3 -1.51%
2012-4 -0.23% 4 -2.46% 6 0.01% 1 0.57% 2 -2.11%
Avg -0.13% -0.34% 0.49% 0.00% 0.03%
 
SPX summary for Presidential Year 4 1928 - 2012
Averages -0.02% 0.07% 0.35% 0.25% 0.66%
% Winners 68% 50% 59% 50% 64%
MDD 6/1/1932 9.28% -- 6/1/2012 2.69% -- 6/4/1928 2.08%
 
SPX summary for all years 1928 - 2015
Averages 0.03% -0.03% 0.20% 0.19% 0.38%
% Winners 57% 51% 60% 53% 57%
MDD 6/1/1932 9.28% -- 6/2/1931 8.34% -- 6/2/1934 4.49


Conclusion

The market made a sharp turn upward last week.

I expect the major averages to be higher on Friday June 3 than they were on Friday May 27.

Last week's negative forecast was a miss.

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Good Luck,

YTD W 9 / L 10 / 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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