Technical Market Report for June 18, 2016

By: Mike Burk | Sat, Jun 18, 2016
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The good news is:
• In spite of lower prices, new lows declined at the end of the week.


The Negatives

There was a spike in NYSE volume last Friday. Banks and mining issues populated the most active list.

On the NASDAQ, new lows outnumbered new highs every day except Wednesday. On the NYSE, new highs outnumbered new lows every day by substantial margins.

Market activity this month has been pretty consistent with the average seasonal pattern.

The first chart 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

Everything was a little better on the NYSE.

The next chart 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 took a hit last week, but closed Friday at a comfortable 82%.

SPX and NY HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 4th 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 mixed, but stronger during the 4th year of the Presidential Cycle than other years.

Report for the week before the 4th Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.33% 0.05% -0.13% 0.38% 0.28% 0.91%
1968-4 0.19% 0.39% 0.00% -0.33% -0.22% 0.03%
1972-4 -0.40% 0.24% 0.24% -0.45% -0.44% -0.81%
 
1976-4 0.11% -0.68% -0.39% 0.68% 0.28% 0.01%
1980-4 0.31% 0.43% 0.69% 0.16% 0.11% 1.70%
1984-4 0.50% 0.44% 0.20% 0.59% 0.57% 2.30%
1988-4 -0.24% 0.46% 0.72% 0.13% 0.15% 1.21%
1992-4 -0.81% 0.66% -0.36% -0.58% -0.07% -1.15%
Avg -0.03% 0.26% 0.17% 0.20% 0.21% 0.81%
 
1996-4 0.64% -0.87% -1.65% 1.10% 1.63% 0.85%
2000-4 3.35% 0.59% 1.26% -3.13% -2.32% -0.26%
2004-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2008-4 -0.85% -0.73% 1.39% -3.33% -0.25% -3.76%
2012-4 0.78% 1.19% 0.02% -2.44% 1.17% 0.73%
Avg 0.98% 0.04% 0.26% -1.95% 0.06% -0.61%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg 0.33% 0.18% 0.18% -0.60% 0.07% 0.15%
Win% 67% 75% 64% 50% 58% 67%
 
OTC summary for all years 1963 - 2015
Avg -0.15% 0.07% 0.11% -0.10% -0.09% -0.16%
Win% 42% 62% 53% 58% 54% 52%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.43% 0.11% 0.41% 0.69% -0.30% 0.48%
Avg -0.43% 0.11% 0.41% 0.69% -0.30% 0.48%
 
1960-4 -0.49% -0.09% 0.30% 0.54% 0.16% 0.42%
1964-4 0.27% -0.42% 0.36% 0.19% 0.31% 0.70%
1968-4 -0.27% -0.31% 0.00% -0.10% -0.40% -1.08%
1972-4 -0.23% 0.42% 0.21% -0.10% -0.38% -0.08%
1976-4 0.50% -0.78% -0.21% 0.52% -0.07% -0.03%
Avg -0.04% -0.24% 0.16% 0.21% -0.08% -0.01%
 
1980-4 0.39% 0.55% 1.37% -0.45% -0.16% 1.70%
1984-4 1.81% 0.58% 1.46% -0.21% -0.03% 3.61%
1988-4 -0.64% 1.02% 1.47% -0.30% -0.38% 1.16%
1992-4 -0.07% 0.16% -0.05% -0.18% 0.08% -0.05%
1996-4 0.30% -0.05% -0.61% 0.63% 0.31% 0.57%
Avg 0.36% 0.45% 0.73% -0.10% -0.04% 1.40%
 
2000-4 1.47% -0.67% 0.21% -1.82% -0.74% -1.55%
2004-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2008-4 0.01% -0.28% 0.58% -2.94% -0.37% -3.00%
2012-4 0.14% 0.98% -0.17% -2.23% 0.72% -0.55%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg 0.20% 0.09% 0.41% -0.41% -0.09% 0.16%
Win% 57% 50% 69% 36% 36% 50%
 
SPX summary for all years 1953 - 2015
Avg -0.20% 0.14% 0.05% -0.09% -0.14% -0.23%
Win% 39% 56% 52% 50% 43% 50%


Money Supply (M2) and interest rates.

Gordon Harms provided the next 2 charts. Money supply has been expanding at a rate well above its recent trend.

SPX and M2 Money Supply Chart

The yield curve continues to compress.

Yield Curve


Conclusion

Last weeks market weakness occurred right on the seasonal schedule.

Next week seasonal activity has been modestly positive during the 4th year of the Presidential Cycle and modestly negative during the other years.

I expect the major averages to be higher on Friday June 24 than they were on Friday June 17.

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Good Luck,

YTD W 11 / 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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