Technical Market Report for October 1, 2016

By: Mike Burk | Sat, Oct 1, 2016
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The good news is:
• New lows have remained at benign levels.


The Negatives

The major indices have been dancing around their all time highs while new highs have failed to confirm those levels.

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 (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

This chart is essentially unchanged from last week. Both the SPX and NY NH are nearly unchanged from last week.

SPX and NY Nh Chart

The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NH, in green, has been calculated from NASDAQ data.

Over the past week, there was not much change in this chart either.

OTC and OTC NH Chart


The positives

Not much happened last week. New highs continued to outnumber new lows by comfortable margins.

The next chart covers the past 6 months showing 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 declined a little, but finished the week at a comfortable 75%.

OTC and OTC HL Ratio Chart

The next chart 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 nearly unchanged.

SPX and NY NH Chart


Seasonality

Next week includes the first 5 trading days of October 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 modestly positive, but negative for the 4th year of the Presidential Cycle because of huge losses in 2008.

Report for the first 5 days of October.
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
  Day1 Day2 Day3 Day4 Day5 Totals
1964-4 0.09% 4 -0.25% 5 0.07% 1 0.19% 2 0.30% 3 0.39%
1968-4 0.20% 2 0.61% 4 0.37% 5 -0.12% 1 -0.53% 2 0.52%
1972-4 -0.24% 1 0.14% 2 -0.15% 3 -0.99% 4 0.09% 5 -1.14%
 
1976-4 -0.90% 5 0.02% 1 -0.78% 2 -0.80% 3 0.67% 4 -1.79%
1980-4 0.99% 3 0.63% 4 1.37% 5 1.33% 1 0.08% 2 4.41%
1984-4 -0.83% 1 -0.71% 2 -0.52% 3 0.16% 4 0.11% 5 -1.80%
1988-4 -0.83% 1 -0.07% 2 0.08% 3 0.16% 4 0.14% 5 -0.52%
1992-4 -0.85% 4 -1.16% 5 -1.12% 1 0.94% 2 -0.24% 3 -2.42%
Avg -0.48% -0.26% -0.20% 0.36% 0.15% -0.43%
 
1996-4 -0.44% 2 1.20% 3 -0.23% 4 1.17% 5 0.26% 1 1.95%
2000-4 -2.83% 1 -3.17% 2 1.95% 3 -1.45% 4 -3.20% 5 -8.70%
2004-4 2.39% 5 0.53% 1 0.16% 2 0.79% 3 -1.14% 4 2.73%
2008-4 -0.62% 3 -4.48% 4 -1.48% 5 -4.34% 1 -5.80% 2 -16.72%
2012-4 -0.09% 1 0.21% 2 0.49% 3 0.45% 4 -0.42% 5 0.64%
Avg -0.32% -1.14% 0.17% -0.67% -2.06% -4.02%
 
OTC summary for Presidential Year 4 1964 - 2012
Averages -0.30% -0.50% 0.01% -0.19% -0.74% -1.73%
% Winners 31% 54% 54% 62% 54% 46%
MDD 10/7/2008 15.73% -- 10/6/2000 8.49% -- 10/5/1992 3.10%
 
OTC summary for all years 1963 - 2015
Averages -0.10% -0.03% 0.19% 0.08% -0.12% 0.02%
% Winners 52% 57% 60% 62% 58% 62%
MDD 10/7/2008 15.73% -- 10/7/1998 13.65% -- 10/6/2000 8.49%
 
SPX Presidential Year 4
  Day1 Day2 Day3 Day4 Day5 Totals
1928-4 -0.05% 1 -0.47% 2 -0.33% 3 0.33% 4 -0.19% 5 -0.70%
1932-4 0.87% 6 -1.10% 1 -0.12% 2 -8.20% 3 0.54% 4 -8.02%
 
1936-4 0.19% 4 1.93% 5 0.98% 6 0.12% 1 0.91% 2 4.13%
1940-4 1.41% 2 0.46% 3 0.09% 4 -0.83% 5 0.00% 6 1.13%
1944-4 0.16% 1 0.00% 2 0.55% 3 0.62% 4 0.15% 5 1.48%
1948-4 1.16% 5 0.51% 6 0.63% 1 -0.19% 2 0.13% 3 2.24%
1952-4 -0.24% 3 0.16% 4 -0.08% 5 -0.24% 1 -0.16% 2 -0.57%
Avg 0.53% 0.61% 0.43% -0.10% 0.20% 1.68%
 
1956-4 -1.43% 1 1.83% 2 1.67% 3 0.02% 4 0.35% 5 2.44%
1960-4 -0.30% 1 -0.69% 2 0.75% 3 0.62% 4 0.58% 5 0.96%
1964-4 -0.12% 4 0.33% 5 0.45% 1 0.06% 2 0.01% 3 0.74%
1968-4 0.19% 2 0.47% 4 0.36% 5 -0.01% 1 0.04% 2 1.04%
1972-4 -0.35% 1 0.13% 2 -0.19% 3 -1.09% 4 0.67% 5 -0.84%
Avg -0.40% 0.41% 0.61% -0.08% 0.33% 0.87%
 
1976-4 -1.02% 5 -0.13% 1 -0.77% 2 -0.25% 3 0.55% 4 -1.62%
1980-4 1.33% 3 0.76% 4 0.97% 5 1.86% 1 -0.55% 2 4.36%
1984-4 -0.89% 1 -0.63% 2 -0.70% 3 0.30% 4 -0.15% 5 -2.07%
1988-4 -0.19% 1 -0.28% 2 0.46% 3 0.19% 4 2.09% 5 2.26%
1992-4 -0.36% 4 -1.40% 5 -0.71% 1 -0.10% 2 -0.72% 3 -3.28%
Avg -0.23% -0.34% -0.15% 0.40% 0.24% -0.07%
 
1996-4 0.26% 2 0.71% 3 -0.18% 4 1.25% 5 0.27% 1 2.32%
2000-4 -0.02% 1 -0.68% 2 0.55% 3 0.14% 4 -1.90% 5 -1.91%
2004-4 1.52% 5 0.32% 1 -0.06% 2 0.67% 3 -1.00% 4 1.45%
2008-4 -0.32% 3 -4.03% 4 -1.35% 5 -3.85% 1 -5.74% 2 -15.29%
2012-4 0.27% 1 0.09% 2 0.36% 3 0.72% 4 -0.03% 5 1.40%
Avg 0.34% -0.72% -0.13% -0.22% -1.68% -2.41%
 
SPX summary for Presidential Year 4 1928 - 2012
Averages 0.09% -0.08% 0.15% -0.36% -0.19% -0.38%
% Winners 45% 55% 55% 59% 55% 59%
MDD 10/7/2008 14.47% -- 10/5/1932 9.33% -- 10/7/1992 3.24%
 
SPX summary for all years 1928 - 2015
Averages 0.06% 0.17% 0.20% -0.14% 0.22% 0.50%
% Winners 50% 66% 54% 55% 52% 64%
MDD 10/7/2008 14.47% -- 10/5/1932 9.33% -- 10/5/1931 9.17


October

Since 1963, over all years, the OTC in October has been up 57% of the time with an average gain of 1.0%. During the 4th year of the Presidential Cycle October has been up 38% time with an average loss of -1.8% (helped considerably by a 17.4% loss in 2008). The best October ever for the OTC was 1974 (+17.2%), the worst 1987 (-27.2%).

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 October 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 October, All, Year 4 1963-2016 Chart

Since 1928 the SPX has been up 59% of the time in October with an average gain of 0.5%. During the 4th year of the Presidential Cycle the SPX has been up 62% of the time with an average loss of -0.2% (helped by losses of 13.9% in 1932 and 16.8% in 2008). The best October ever for the SPX was 1974 (+16.3%), the worst 1987 (-21.8%).

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

SPX October, All, Year 4 1928-2016 Chart

Since 1979 the Russell 2000 (R2K) has been up 57% of the time in October with an average loss of -0.2%. During the 4th year of the Presidential Cycle the R2K has been up 33% of the time with an average loss of -2.6%. The best October ever for the R2K, 2011 (+15.0%), the worst 1987 (-30.7%)

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

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

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 56% of the time in October with an average gain of 0.4%. During the 4th year of the Presidential Cycle the DJIA has been up 63% of the time in October with an average gain of 0.8%. The best October ever for the DJIA, 1885 (+12.3%), the worst 1987 (-23.2%).

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

Dow Industrials October, All, Year 4 1885-2016 Chart


Conclusion

Not much happened last week. The major indices moved slightly along with the breadth indicators.

I expect the major averages to be higher on Friday October 7 than they were on Friday September 30.

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

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

Good Luck,

YTD W 15 / L 16 / T 8

 


 

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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