Technical Market Report for July 23, 2016

By: Mike Burk | Sat, Jul 23, 2016
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The good news is:
• The blue chip indices and the S&P mid cap index closed at all time highs last week.


The Negatives

The blue chip indices have been hitting new highs while the secondaries are trading well off their all time highs.


The positives

The market has come through a seasonally weak period with good strength in the breadth indicators

The secondaries while still below their all time highs, have been outperforming the blue chips for the past several months.

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 was down for the week, but finished at a very strong 81%.

OTC and OTC HL Ratio Chart

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 remained at a sensationally high 98%.

SPX and NY HL Ratio Chart

The next chart shows the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

OTC NH remained very strong.

OTC and OTC NH Chart

The next chart is similar to the one above except is shows the SPX in red and NY NH has been calculated from NYSE data.

NY NH declined last week, but remains at a very comfortable level.

SPX and NY NH Chart


Seasonality

Next week includes the last 5 trading days of July 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 for the coming week have been mostly positive and stronger during the 4th year of the Presidential Cycle than other years.

Report for the last 5 days of July.
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
1964-4 -0.02% 1 -0.34% 2 0.02% 3 0.05% 4 0.10% 5 -0.19%
1968-4 -1.00% 2 -0.84% 4 -1.41% 5 0.21% 1 -1.28% 2 -4.31%
1972-4 -0.23% 2 0.14% 3 -0.23% 4 -0.16% 5 -0.31% 1 -0.79%
 
1976-4 -0.13% 1 -0.20% 2 -0.32% 3 -0.18% 4 0.48% 5 -0.34%
1980-4 -0.17% 5 0.23% 1 0.61% 2 0.74% 3 -0.30% 4 1.11%
1984-4 -0.19% 3 0.78% 4 0.99% 5 -0.15% 1 0.33% 2 1.75%
1988-4 -0.06% 1 -0.34% 2 -0.64% 3 0.20% 4 0.85% 5 0.00%
1992-4 -0.16% 1 1.22% 2 1.03% 3 0.23% 4 0.35% 5 2.67%
Avg -0.14% 0.34% 0.33% 0.17% 0.34% 1.04%
 
1996-4 1.92% 4 1.60% 5 -1.20% 1 0.52% 2 0.80% 3 3.64%
2000-4 1.21% 2 -1.04% 3 -3.65% 4 -4.66% 5 2.84% 1 -5.31%
2004-4 -0.54% 1 1.64% 2 -0.58% 3 1.23% 4 0.33% 5 2.07%
2008-4 1.33% 5 -2.00% 1 2.45% 2 0.44% 3 -0.18% 4 2.03%
2012-4 -0.31% 3 1.37% 4 2.24% 5 -0.41% 1 -0.21% 2 2.67%
Avg 0.72% 0.31% -0.15% -0.58% 0.72% 1.02%
 
OTC summary for Presidential Year 4 1964 - 2012
Averages 0.13% 0.17% -0.05% -0.15% 0.29% 0.39%
% Winners 23% 54% 46% 62% 62% 62%
MDD 7/28/2000 9.10% -- 7/30/1968 4.25% -- 7/28/2008 2.00%
 
OTC summary for all years 1963 - 2015
Averages 0.01% 0.04% -0.11% 0.00% -0.05% -0.10%
% Winners 53% 47% 45% 62% 49% 58%
MDD 7/28/2000 9.10% -- 7/31/1974 6.22% -- 7/31/1969 4.97%
 
SPX Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1928-4 0.21% 4 0.94% 5 0.26% 6 0.00% 1 -0.21% 2 1.20%
1932-4 -1.46% 2 5.00% 3 3.17% 4 3.08% 5 1.16% 6 10.95%
 
1936-4 1.00% 1 -6.38% 2 5.56% 3 0.38% 4 -1.06% 5 -0.51%
1940-4 0.50% 5 0.40% 6 0.70% 1 2.48% 2 -0.39% 3 3.70%
1944-4 -0.23% 3 0.00% 4 -0.55% 5 0.00% 6 0.08% 1 -0.70%
1948-4 -0.92% 1 1.05% 2 -0.68% 3 -0.80% 4 -1.25% 5 -2.59%
1952-4 -0.32% 5 0.16% 1 0.24% 2 0.44% 3 0.12% 4 0.63%
Avg 0.01% -0.95% 1.05% 0.50% -0.50% 0.11%
 
1956-4 0.22% 3 0.08% 4 -0.81% 5 -0.16% 1 0.80% 2 0.13%
1960-4 -0.99% 1 0.61% 2 -0.62% 3 0.74% 4 1.72% 5 1.46%
1964-4 -0.46% 1 -0.28% 2 0.08% 3 0.21% 4 0.11% 5 -0.33%
1968-4 -0.12% 2 -1.28% 4 0.41% 5 -0.70% 1 0.09% 2 -1.60%
1972-4 -0.30% 2 -0.07% 3 -0.23% 4 0.09% 5 0.01% 1 -0.49%
Avg -0.33% -0.19% -0.23% 0.03% 0.55% -0.17%
 
1976-4 0.01% 1 -0.57% 2 -0.42% 3 -0.12% 4 0.50% 5 -0.59%
1980-4 -0.83% 5 0.54% 1 0.80% 2 -0.14% 3 -0.46% 4 -0.09%
1984-4 0.68% 3 0.84% 4 0.74% 5 -0.66% 1 0.31% 2 1.91%
1988-4 0.45% 1 0.19% 2 -1.01% 3 1.34% 4 2.26% 5 3.22%
1992-4 -0.01% 1 1.45% 2 1.13% 3 0.40% 4 0.07% 5 3.04%
Avg 0.06% 0.49% 0.25% 0.16% 0.53% 1.50%
 
1996-4 0.72% 4 0.75% 5 -0.79% 1 0.69% 2 0.74% 3 2.11%
2000-4 0.69% 2 -1.50% 3 -0.19% 4 -2.05% 5 0.77% 1 -2.27%
2004-4 -0.20% 1 0.99% 2 0.05% 3 0.46% 4 0.12% 5 1.42%
2008-4 0.42% 5 -1.86% 1 2.34% 2 1.67% 3 -1.31% 4 1.25%
2012-4 -0.03% 3 1.65% 4 1.91% 5 -0.05% 1 -0.43% 2 3.05%
Avg 0.32% 0.01% 0.66% 0.14% -0.02% 1.11%
 
SPX summary for Presidential Year 4 1928 - 2012
Averages -0.04% 0.12% 0.55% 0.33% 0.17% 1.13%
% Winners 45% 64% 59% 55% 68% 59%
MDD 7/28/1936 6.38% -- 7/28/2000 3.70% -- 7/30/1948 2.70%
 
SPX summary for all years 1928 - 2015
Averages -0.05% 0.04% 0.09% 0.15% 0.05% 0.27%
% Winners 55% 57% 52% 62% 60% 57%
MDD 7/26/1934 7.83% -- 7/31/1933 6.84% -- 7/31/1974 6.68%


Conclusion

Last week was encouraging. The breadth indicators held up well while prices weakened a little.

I expect the major averages to be higher on Friday July 29 than they were on Friday July 22.

Last weeks negative forecast was a miss.

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Good Luck,

YTD W 12 / L 14 / 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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