Technical Market Report for June 4, 2016

By: Mike Burk | Sat, Jun 4, 2016
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The good news is:
• New highs picked up last week and the secondaries were stronger than the blue chips.


The Negatives

There are no significant negatives.

NASDAQ new highs came up a little short, but new lows have all but disappeared.


The positives

The missing element of the recent rally has been NYSE new highs and last week as the yield on 10 yr treasuries fell below 1.7%, we got some.

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 turned sharply upward 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 continued to move sharply upward.

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 finished the week at a very strong 72%.

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 finished the week at a sensational 94%.

SPX and NH HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday 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 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 mixed and stronger during the 4th year of the Presidential Cycle than other periods.

Report for the week before the 2nd Friday of June.
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 -0.03% -0.46% 0.44% 0.41% 0.13% 0.49%
1968-4 0.38% -0.71% 0.00% 0.21% -0.32% -0.44%
1972-4 -0.58% -0.56% -0.76% 0.05% -0.38% -2.23%
 
1976-4 -0.60% -0.11% -0.20% 0.41% 0.46% -0.04%
1980-4 0.21% 0.75% 0.69% 0.06% 0.82% 2.54%
1984-4 1.21% -0.13% 0.44% 0.17% 0.19% 1.88%
1988-4 0.77% -0.11% 1.08% 0.31% 0.43% 2.47%
1992-4 -0.58% -1.41% -0.71% -0.36% 0.32% -2.74%
Avg 0.20% -0.20% 0.26% 0.12% 0.45% 0.82%
 
1996-4 0.02% 0.07% 0.37% -0.79% -1.01% -1.35%
2000-4 0.22% -1.71% 2.21% -0.36% 1.29% 1.65%
2004-4 -1.49% 1.30% 0.13% -0.73% 0.15% -0.64%
2008-4 -0.61% -0.43% -2.24% 0.43% 2.09% -0.76%
2012-4 0.46% 0.66% 2.40% -0.48% 0.97% 4.00%
Avg -0.28% -0.02% 0.57% -0.39% 0.70% 0.58%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.05% -0.22% 0.32% -0.05% 0.39% 0.37%
Win% 54% 31% 67% 62% 77% 46%
 
OTC summary for all years 1963 - 2015
Avg -0.22% -0.18% 0.03% 0.06% 0.09% -0.23%
Win% 49% 30% 52% 65% 60% 38%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 0.59% 0.02% -0.50% 0.79% -1.85% -0.95%
1960-4 1.17% 0.95% 0.80% 0.19% -0.05% 3.06%
1964-4 -0.48% 0.64% 0.38% 0.37% -0.16% 0.74%
1968-4 0.14% 0.25% 0.00% -0.40% -0.12% -0.14%
1972-4 -0.83% -0.56% -0.52% -0.34% -0.39% -2.64%
Avg 0.12% 0.26% 0.04% 0.12% -0.51% 0.01%
 
1976-4 -0.52% 0.17% -0.06% 0.83% 1.37% 1.78%
1980-4 0.45% 0.84% 1.19% -0.43% 0.25% 2.29%
1984-4 0.72% -0.45% 0.89% -0.06% 0.16% 1.26%
1988-4 0.23% -0.70% 2.39% -0.49% 0.39% 1.82%
1992-4 -0.03% -0.80% -0.69% 0.44% 0.17% -0.90%
Avg 0.17% -0.19% 0.74% 0.06% 0.47% 1.25%
 
1996-4 -0.17% -0.18% -0.29% -0.17% -0.31% -1.11%
2000-4 -0.66% -0.67% 0.93% -0.66% -0.32% -1.37%
2004-4 -0.98% 0.60% 0.14% -0.13% 0.26% -0.12%
2008-4 0.08% -0.24% -1.69% 0.33% 1.50% -0.02%
2012-4 0.01% 0.57% 2.30% -0.01% 0.81% 3.69%
Avg -0.34% 0.02% 0.28% -0.13% 0.39% 0.21%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.02% 0.03% 0.38% 0.02% 0.11% 0.49%
Win% 53% 53% 57% 40% 53% 47%
 
SPX summary for all years 1953 - 2015
Avg -0.23% -0.06% 0.04% 0.09% 0.15% -0.02%
Win% 44% 43% 47% 59% 60% 46%


June

Since 1963, over all years, the OTC in June has been up 57% of the time with an average gain of 0.5%. During the 4th year of the Presidential Cycle June has been up 69% time with an average gain of 1.9%. The average return was helped by a 16.6% gain in 2000. The best June ever for the OTC was 2000 (+16.6%), the worst 2002 (-9.4%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in June over all years since 1963 while the black line shows the average during the 4th year of the Presidential Cycle over the same period.

OTC, June All, Year 4 1963-2016 Chart

Since 1928 the SPX has been up 55% of the time in June with an average gain of 0.7%. During the 4th year of the Presidential Cycle the SPX has been up 77% of the time with an average gain of 1.5%. The best June ever for the SPX was 1938 (+24.7%) the worst 1930 (-16.5%).

The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in June, in red and the performance during the 4th year of the Presidential Cycle in black.

SPX, June All, Year 4 1928-2016 Chart

Since 1979 the Russell 2000 (R2K) has been up 62% of the time in June with an average gain of 0.6%. During the 4th year of the Presidential Cycle the R2K has been up 67% of the time with an average gain of 1.6%. The best June ever for the R2K, 2000 (+8.6%), the worst 2010 (-7.9%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in June in magenta and the performance during the 4th year of the Presidential Cycle in black.

Russell 2000, June All, Year 4 1979-2016 Chart

Since 1885 the DJIA has been up 46% of the time in June with an average gain of 0.1%. During the 4th year of the Presidential Cycle the DJIA has been up 53% of the time in June with an average gain of 0.2%. The best June ever for the DJIA 1938 (+24.3%), the worst 1930 (-17.7%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in June in grey and the performance during the 4th year of the Presidential Cycle in black.

DOW, June All, Year 4 1885-2016 Chart


Conclusion

With new highs rising and the secondaries outperforming the blue chips, the market is in pretty good shape.

I expect the major averages to be higher on Friday June 10 than they were on Friday June 3.

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Good Luck,

YTD W 10 / 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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