Technical Market Report for January 28, 2017

By: Mike Burk | Sat, Jan 28, 2017
Print Email

The good news is:
• Most of the major indices closed at all time highs last week.


The Negatives

New highs failed to confirm the new index highs and the blue chips outperformed the secondaries.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH rose a bit last week, but failed to confirm the index high by a significant margin.

OTC and OTC NH

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.

The pattern is similar to the chart above.

SPX and NY NH

The next chart covers the past year showing the Russell 2000 (R2K) in red, the SPX in green and a Fasttrack (https://investorsfasttrack.com/) relative strength indicator called Accutrack as a histogram in yellow.

Accutrack indicates the relative performance of the R2K to the SPX and has been falling sharply since late November. Accutrack went negative about 2 weeks ago.

Relative Performance of the R2K to the SPX


The Positives

New highs picked up last week continuing to outnumber new lows by strong 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 rose finishing the week at a very strong 84%.

OTC and OTC HL Ratio

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

NY HL Ratio rose last week to a very strong 92%.

SPX and NY HL Ratio


Seasonality

Next week includes the last 2 trading days of January and the 1st 3 days of February during the 1st 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 2016 while SPX data runs from 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns for the coming week have been modestly positive over all years, but modestly negative during the 1st year of the Presidential Cycle.

Report for the last 2 days of January and the first 3 days of February.
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 1
  Day2 Day1 Day1 Day2 Day3 Totals
1965-1 0.75% 4 0.36% 5 0.23% 1 0.15% 2 0.50% 3 1.99%
1969-1 0.22% 4 0.39% 5 0.67% 1 0.01% 2 0.41% 3 1.69%
1973-1 -1.00% 2 -0.19% 3 0.14% 4 -1.14% 5 -0.36% 1 -2.55%
 
1977-1 -0.33% 5 -0.19% 1 0.80% 2 0.17% 3 -0.13% 4 0.31%
1981-1 0.26% 4 -0.04% 5 -2.39% 1 0.24% 2 0.52% 3 -1.40%
1985-1 0.87% 3 0.04% 4 -0.10% 5 0.84% 1 0.69% 2 2.35%
1989-1 0.32% 1 0.52% 2 0.48% 3 0.48% 4 0.29% 5 2.09%
1993-1 -0.46% 4 0.24% 5 0.78% 1 0.48% 2 0.50% 3 1.54%
Avg 0.13% 0.12% -0.09% 0.44% 0.38% 0.98%
 
1997-1 1.17% 4 0.65% 5 -0.28% 1 -0.17% 2 -1.85% 3 -0.48%
2001-1 0.00% 2 -2.31% 3 0.36% 4 -4.39% 5 -0.65% 1 -6.99%
2005-1 -0.55% 5 1.31% 1 0.30% 2 0.31% 3 -0.84% 4 0.53%
2009-1 -3.24% 4 -2.08% 5 1.22% 1 1.46% 2 -0.08% 3 -2.72%
2013-1 -0.36% 3 -0.01% 4 1.18% 5 -1.51% 1 1.29% 2 0.59%
Avg -0.60% -0.49% 0.56% -0.86% -0.43% -1.81%
 
OTC summary for Presidential Year 1 1965 - 2013
Averages -0.18% -0.10% 0.26% -0.24% 0.02% -0.23%
% Winners 54% 54% 77% 69% 54% 62%
MDD 2/5/2001 6.88% -- 1/30/2009 5.26% -- 2/5/1973 2.53%
 
OTC summary for all years 1963 - 2016
Averages -0.01% 0.24% 0.26% -0.07% 0.12% 0.54%
% Winners 56% 62% 70% 67% 57% 63%
MDD 2/5/2001 6.88% -- 1/30/2009 5.26% -- 2/3/1970 5.12%
 
SPX Presidential Year 1
  Day2 Day1 Day1 Day2 Day3 Totals
1929-1 0.35% 3 1.14% 4 0.39% 5 -0.15% 6 -0.62% 1 1.11%
1933-1 0.29% 1 -0.57% 2 -3.89% 3 -1.80% 4 -0.31% 5 -6.28%
 
1937-1 0.79% 5 0.34% 6 0.28% 1 0.67% 2 0.72% 3 2.81%
1941-1 -1.76% 4 0.30% 5 -0.70% 6 -0.40% 1 0.10% 2 -2.46%
1945-1 -0.59% 2 0.07% 3 0.22% 4 0.74% 5 0.37% 6 0.81%
1949-1 0.20% 6 -0.07% 1 0.79% 2 0.07% 3 -0.20% 4 0.79%
1953-1 0.27% 4 0.69% 5 0.49% 1 0.11% 2 -0.45% 3 1.11%
Avg -0.22% 0.27% 0.22% 0.24% 0.11% 0.61%
 
1957-1 0.45% 3 -0.42% 4 -0.22% 5 -0.20% 1 -1.44% 2 -1.84%
1961-1 1.19% 1 -0.31% 2 0.19% 3 0.65% 4 -0.13% 5 1.60%
1965-1 0.29% 4 0.09% 5 0.02% 1 -0.03% 2 0.09% 3 0.46%
1969-1 0.04% 4 0.45% 5 -0.12% 1 0.03% 2 0.27% 3 0.67%
1973-1 -0.16% 2 0.17% 3 -1.09% 4 -0.36% 5 -0.10% 1 -1.54%
Avg 0.36% 0.00% -0.24% 0.02% -0.26% -0.13%
 
1977-1 0.14% 5 0.10% 1 0.50% 2 -0.18% 3 -0.50% 4 0.06%
1981-1 -0.08% 4 -0.53% 5 -2.04% 1 1.22% 2 0.10% 3 -1.32%
1985-1 1.15% 3 0.13% 4 -0.56% 5 0.96% 1 0.14% 2 1.83%
1989-1 0.40% 1 0.84% 2 -0.13% 3 -0.08% 4 0.04% 5 1.07%
1993-1 0.13% 4 0.03% 5 0.85% 1 0.01% 2 1.05% 3 2.06%
Avg 0.35% 0.11% -0.27% 0.39% 0.17% 0.74%
 
1997-1 1.51% 4 0.25% 5 0.07% 1 0.32% 2 -1.39% 3 0.77%
2001-1 0.70% 2 -0.56% 3 0.55% 4 -1.75% 5 0.36% 1 -0.70%
2005-1 -0.27% 5 0.85% 1 0.69% 2 0.32% 3 -0.28% 4 1.30%
2009-1 -3.31% 4 -2.28% 5 -0.05% 1 1.58% 2 -0.75% 3 -4.81%
2013-1 -0.39% 3 -0.26% 4 1.01% 5 -1.15% 1 1.04% 2 0.25%
Avg -0.35% -0.40% 0.45% -0.14% -0.20% -0.64%
 
SPX summary for Presidential Year 1 1929 - 2013
Averages 0.06% 0.02% -0.12% 0.03% -0.08% -0.10%
% Winners 68% 64% 59% 55% 50% 68%
MDD 2/3/1933 6.45% -- 2/2/2009 5.57% -- 2/2/1981 2.63%
 
SPX summary for all years 1928 - 2016
Averages 0.09% 0.25% 0.19% 0.06% -0.12% 0.48%
% Winners 60% 62% 63% 59% 47% 67%
MDD 2/3/1933 6.45% -- 2/2/2009 5.57% -- 2/3/1938 5.05%


February

Since 1963, over all years, the OTC in February has been up 56% of the time with an average gain of 0.6%. During the 1st year of the Presidential Cycle February has been up only 31% time with an average loss of 3.6% (helped considerably by a 22.4% loss in 2001). The best February ever for the OTC was 2000 (+19.2%), the worst 2001 (-22.4%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change 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 daily performance of the OTC in February over all years since 1963 in blue, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

OTC February, All Year 1 1963-2017

Since 1928 the SPX has been up 53% of the time in February and has, on average, been flat (no change, 0.0%). During the 1st year of the Presidential Cycle the SPX has been up 41% of the time with an average loss of -2.1%. The best February for the SPX was 1931 (+11.4%) the worst 1933 (-18.4%).

The chart below is similar to the one above except it shows the average daily average performance over all years since 1928 for the SPX in February in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.

SPX February, All Year 1 1928-2017

Since 1979 the Russell 2000 (R2K) has been up 58% of the time in February with an average gain of 1.2%. During the 1st year of the Presidential Cycle the R2K has been up 56% of the time with an average loss of -2.0%. The best February for the R2K 2000 (+16.4%), the worst 2009 (-12.3%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in February in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

Russell 2000 February, All Year 1 1979-2017

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 52% of the time in February with an average loss of -0.1%. During the 1st year of the Presidential Cycle the DJIA has been up 36% of the time in February with an average loss of -1.5%. The best February for the DJIA 1931 (+13.2%), the worst 1933 (-15.6%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in February in grey and the average performance during the 1st year of the Presidential Cycle in green.

Dow Industrials February, All Year 1 1885-2017


Conclusion

All of the major indices rose last week and the blue chip indices hit all time highs. There was a nice bump in new highs producing not so subtle non-confirmations and the secondaries continued to under perform the blue chips. The market appears to setting up for a pull back in February consistent with the seasonal pattern.

I expect the major averages to be higher on Friday February 3 than they were on Friday January 27.

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

Good Luck,

YTD W 2 / L 1 / T 1

 


 

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.

Copyright © 2003-2017 Mike Burk

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com