Technical Market Report for June 11, 2016

By: Mike Burk | Sat, Jun 11, 2016
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The good news is:
• The OEX (AKA S&P 100, an index of 100 blue chip issues) closed at an all time high last Wednesday.


The Negatives

The market had a great week through Wednesday's close, after that it deteriorated spectacularly. NYSE new highs fell from 275 on Wednesday to 152 on Friday while new lows rose from 5 on Wednesday to 26 on Friday. The NASDAQ has been consistently weaker than the NYSE and that pattern continued. NASDAQ new highs declined from 133 on Wednesday to 46 on Friday while new lows increased from 28 to 53 (new lows outnumbered new highs on Friday).

The number of new lows on Friday was not threatening, but the sharpness of the reversal was.


The positives

The search for yield continues to drive the NYSE breadth numbers.

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 hit its highest level in over a year on Wednesday.

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 also had a good week through Wednesday.

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 dropped sharply on Thursday and Friday, but finished the week at a comfortable 65%.

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 declined slightly finishing the week at an extremely strong 92%.

SPX and NYSE HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd 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 for the coming week have been a little weak by all measures.

Report for the week before the 3rd Friday of June.
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 -0.13% 0.18% 0.46% 0.69% 0.05% 1.25%
1968-4 -0.34% -1.15% 0.00% -0.76% -0.14% -2.40%
1972-4 -0.15% 0.31% 0.51% -0.12% -0.01% 0.54%
 
1976-4 0.79% 0.06% 0.54% 0.89% 0.37% 2.64%
1980-4 0.13% 0.12% 0.13% -0.29% -0.14% -0.05%
1984-4 -0.93% -0.45% 0.31% -0.91% 0.01% -1.97%
1988-4 0.14% 0.44% 0.14% -0.51% -0.05% 0.18%
1992-4 -0.09% -0.87% -1.92% -0.74% 0.92% -2.70%
Avg 0.01% -0.14% -0.16% -0.31% 0.22% -0.38%
 
1996-4 -0.42% -2.07% -0.51% -0.83% 0.69% -3.14%
2000-4 -2.76% 2.21% -1.39% 1.27% 0.39% -0.29%
2004-4 -0.62% 1.00% 1.35% -0.27% 0.49% 1.95%
2008-4 0.83% -0.69% -1.14% 1.33% -2.27% -1.94%
2012-4 -1.70% 1.19% -0.86% 0.63% 1.29% 0.54%
Avg -0.94% 0.33% -0.51% 0.43% 0.12% -0.58%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.40% 0.02% -0.20% 0.03% 0.12% -0.41%
Win% 31% 62% 58% 38% 62% 46%
 
OTC summary for all years 1963 - 2015
Avg -0.18% 0.13% 0.02% -0.04% 0.01% -0.06%
Win% 43% 60% 63% 46% 58% 53%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 1.26% 1.42% 0.13% -0.24% 0.13% 2.71%
1960-4 0.03% -0.14% -0.59% -0.12% -0.10% -0.92%
1964-4 0.46% 0.54% 0.51% -0.02% 0.12% 1.61%
1968-4 -0.99% -0.14% 0.00% 0.52% 0.15% -0.46%
1972-4 0.14% 0.50% 0.78% 0.05% -0.07% 1.40%
Avg 0.18% 0.44% 0.21% 0.04% 0.04% 0.87%
 
1976-4 1.02% -0.48% 0.54% 1.57% 0.14% 2.80%
1980-4 0.24% -0.05% 0.20% -1.38% -0.52% -1.51%
1984-4 -1.36% -0.57% -0.04% -1.14% -0.90% -4.02%
1988-4 0.06% 1.06% 0.05% -1.71% 0.34% -0.19%
1992-4 0.13% -0.48% -1.48% -0.32% 0.68% -1.48%
Avg 0.02% -0.10% -0.15% -0.60% -0.05% -0.88%
 
1996-4 -0.10% -0.47% -0.02% 0.02% 0.72% 0.15%
2000-4 -0.75% 1.62% 0.07% 0.55% -0.95% 0.54%
2004-4 -0.42% 0.36% 0.85% -0.30% -0.55% -0.04%
2008-4 0.01% -0.68% -0.97% 0.38% -1.85% -3.12%
2012-4 -1.26% 1.17% -0.70% 1.08% 1.03% 1.32%
Avg -0.51% 0.40% -0.15% 0.35% -0.32% -0.23%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.10% 0.24% -0.05% -0.07% -0.11% -0.08%
Win% 60% 47% 57% 47% 53% 47%
 
SPX summary for all years 1953 - 2015
Avg -0.07% 0.16% 0.00% -0.15% 0.00% -0.07%
Win% 57% 57% 48% 48% 59% 54%


Conclusion

The breadth indicators deteriorated sharply on Thursday and Friday and Seasonality for next week has been weak.

I expect the major averages to be lower on Friday June 17 than they were on Friday June 10.

Last week the Dow Jones Industrial Average was up slightly while the other major indices were down slightly so I am calling last week's positive forecast a tie.

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Good Luck,

YTD W 10 / L 10 / T 3

 


 

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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