Technical Market Report for August 27, 2016

By: Mike Burk | Sat, Aug 27, 2016
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The good news is:
• New lows remain insignificant and the secondaries continue to outperform the blue chips.


The Negatives

Volume continued at its lowest level in a long time.


The positives

Last week the secondaries continued to outperform the blue chips.

Weekly movements have been less than 1% for all of the major indices.

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 continued to dance around the 80% line where it has been for most of the month. This is very strong.

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 continued to hold above 90%.

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 rose a bit to 134 last week. OTC NH is near its highest level of the last 2 years.

OTC and OTC NH Chart

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

NY NH continued its fall, but remains at a strong 174.

SPX and NY NH Chart


Seasonality

Next week includes the last 3 trading days of August and the 1st 2 trading days of September 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 strong and stronger during the 4th year of the Presidential Cycle than other years.

Report for the last 3 days of August and first 2 days of September.
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
  Day3 Day2 Day1 Day1 Day2 Totals
1964-4 0.12% 4 0.46% 5 0.00% 1 -0.12% 2 0.07% 3 0.54%
1968-4 0.22% 2 -0.58% 4 0.28% 5 0.34% 2 0.24% 3 0.50%
1972-4 -0.25% 2 0.26% 3 0.13% 4 0.58% 5 -0.28% 2 0.43%
 
1976-4 -0.07% 5 0.16% 1 0.47% 2 0.99% 3 0.10% 4 1.65%
1980-4 -0.13% 3 -0.64% 4 0.29% 5 0.45% 2 1.20% 3 1.18%
1984-4 0.17% 3 -0.10% 4 0.03% 5 -1.28% 2 -0.31% 3 -1.48%
1988-4 0.48% 1 0.07% 2 0.02% 3 -0.95% 4 0.95% 5 0.56%
1992-4 0.80% 4 0.05% 5 -0.08% 1 0.44% 2 1.00% 3 2.21%
Avg 0.25% -0.09% 0.15% -0.07% 0.59% 0.83%
 
1996-4 0.43% 3 -0.77% 4 -0.31% 5 0.07% 2 0.13% 3 -0.45%
2000-4 0.28% 2 0.53% 3 2.50% 4 0.66% 5 -2.15% 2 1.83%
2004-4 0.49% 5 -1.37% 1 0.09% 2 0.67% 3 1.24% 4 1.12%
2008-4 0.87% 3 1.22% 4 -1.83% 5 -0.77% 2 -0.66% 3 -1.17%
2012-4 0.13% 3 -1.05% 4 0.60% 5 0.26% 2 -0.19% 3 -0.25%
Avg 0.44% -0.29% 0.21% 0.18% -0.32% 0.22%
 
OTC summary for Presidential Year 4 1964 - 2012
Averages 0.27% -0.13% 0.17% 0.10% 0.10% 0.51%
% Winners 77% 54% 69% 69% 62% 69%
MDD 9/3/2008 3.23% -- 9/5/2000 2.15% -- 9/5/1984 1.65%
 
OTC summary for all years 1963 - 2015
Averages 0.11% -0.13% 0.10% 0.02% 0.10% 0.20%
% Winners 62% 62% 71% 60% 62% 62%
MDD 8/31/1998 15.22% -- 9/3/2002 6.23% -- 9/5/2001 5.68%
 
SPX Presidential Year 4
  Day3 Day2 Day1 Day1 Day2 Totals
1928-4 0.19% 3 0.15% 4 1.26% 5 0.00% 6 0.48% 2 2.08%
1932-4 0.12% 1 -1.28% 2 -0.94% 3 0.95% 4 4.37% 5 3.21%
 
1936-4 0.19% 5 0.25% 6 0.19% 1 -0.25% 2 0.38% 3 0.75%
1940-4 -0.48% 4 1.74% 5 0.57% 6 0.00% 2 2.08% 3 3.92%
1944-4 0.31% 2 0.23% 3 -0.39% 4 0.31% 5 -0.62% 2 -0.15%
1948-4 0.44% 5 -0.81% 1 -0.06% 2 1.19% 3 0.50% 4 1.25%
1952-4 0.44% 3 0.12% 4 0.24% 5 0.48% 2 0.40% 3 1.68%
Avg 0.18% 0.31% 0.11% 0.35% 0.55% 1.49%
 
1956-4 -0.44% 3 -0.89% 4 1.21% 5 0.80% 2 0.27% 3 0.96%
1960-4 -0.28% 1 -1.04% 2 0.21% 3 0.23% 4 -0.16% 5 -1.04%
1964-4 0.47% 4 0.35% 5 -0.20% 1 0.43% 2 0.16% 3 1.21%
1968-4 -0.13% 2 -0.07% 4 0.12% 5 0.47% 2 0.70% 3 1.09%
1972-4 0.16% 2 0.14% 3 0.47% 4 0.38% 5 -0.25% 2 0.91%
Avg -0.04% -0.30% 0.36% 0.46% 0.15% 0.62%
 
1976-4 0.16% 5 0.58% 1 0.82% 2 1.12% 3 -0.13% 4 2.55%
1980-4 -1.06% 3 -1.17% 4 0.25% 5 1.10% 2 1.93% 3 1.06%
1984-4 -0.18% 3 -0.30% 4 0.05% 5 -1.08% 2 -0.36% 3 -1.87%
1988-4 1.02% 1 0.07% 2 -0.38% 3 -1.21% 4 2.37% 5 1.87%
1992-4 0.00% 4 0.32% 5 -0.20% 1 0.49% 2 0.46% 3 1.08%
Avg -0.01% -0.10% 0.11% 0.08% 0.85% 0.94%
 
1996-4 -0.24% 3 -1.11% 4 -0.82% 5 0.42% 2 0.13% 3 -1.62%
2000-4 -0.28% 2 -0.48% 3 1.00% 4 0.20% 5 -0.90% 2 -0.45%
2004-4 0.24% 5 -0.78% 1 0.46% 2 0.15% 3 1.12% 4 1.20%
2008-4 0.80% 3 1.48% 4 -1.37% 5 -0.41% 2 -0.20% 3 0.30%
2012-4 0.08% 3 -0.78% 4 0.51% 5 -0.12% 2 -0.11% 3 -0.41%
Avg 0.12% -0.33% -0.04% 0.05% 0.01% -0.20%
 
SPX summary for Presidential Year 4 1928 - 2012
Averages 0.07% -0.15% 0.14% 0.26% 0.57% 0.89%
% Winners 64% 50% 64% 68% 64% 73%
MDD 8/31/1932 2.21% -- 8/28/1980 2.21% -- 8/30/1996 2.16%
 
SPX summary for all years 1928 - 2015
Averages 0.03% -0.09% 0.12% -0.08% 0.13% 0.12%
% Winners 63% 49% 62% 63% 54% 64%
MDD 8/31/1998 11.68% -- 9/4/1946 8.63% -- 9/3/2002 6.08%


September

As measured by the major indices, September, over all years, has been the weakest month of the year, but not during the 4th year of the Presidential Cycle.

Since 1963, over all years, the OTC in September has been up 58% of the time with no average gain of loss. During the 4th year of the Presidential Cycle September has been up 69% time with an average gain of 0.3%. The best September ever for the OTC was 2010 (+12.0%), the worst 2001 (-17.0%).

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 September 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 September, All Year 4, 1963-2016 Chart

Since 1928 the SPX has been up 45% of the time in September with an average loss of -1.1%. During the 4th year of the Presidential Cycle the SPX has been up 55% of the time with an average loss of -0.3%. The best September ever for the SPX was 1939 (+16.5%) the worst 1931 (-29.9%).

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

SPX September, All Year 4, 1928-2016 Chart

Since 1979 the Russell 2000 (R2K) has been up 54% of the time in September with an average loss 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 0.7%. The best September ever for the R2K, 2010 (+12.3%), the worst 2001 (-13.6%)

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

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

Since 1885 the DJIA has been up 44% of the time in September with an average loss of -0.9%. During the 4th year of the Presidential Cycle the DJIA has been up 44% of the time in September with an average gain of 0.2%. The best September ever for the DJIA, 1939 up (+13.5%), the worst 1931 (-30.7%).

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

Dow Jones Industrial Average September, All Year 4, 1885-2016 Chart


Conclusion

Last week was more of the same, no volume, no new lows and the secondaries were a little stronger then the blue chips.

I expect the major averages to be higher on Friday September 2 than they were on Friday August 26.

Last week the Russell 2000 was up slightly while the other indices were down slightly so I am calling last weeks positive forecast a tie.

These reports are archived at: http://www.safehaven.com/

Good Luck,

YTD W 13 / L 14 / T 7

 


 

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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