• 287 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 289 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 689 days Could Crypto Overtake Traditional Investment?
  • 694 days Americans Still Quitting Jobs At Record Pace
  • 696 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 699 days Is The Dollar Too Strong?
  • 699 days Big Tech Disappoints Investors on Earnings Calls
  • 700 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 702 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 706 days Crypto Investors Won Big In 2021
  • 706 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 707 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 709 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 710 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 713 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 714 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 714 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 716 days Are NFTs About To Take Over Gaming?
How Millennials Are Reshaping Real Estate

How Millennials Are Reshaping Real Estate

The real estate market is…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

  1. Home
  2. Markets
  3. Other

Technical Market Report

The good news is:
• The market has come off a bottom and seasonally next week has a very positive bias.

Short Term

The market is overbought.

In the 8 trading days from the Monday after Thanksgiving through last Thursday the S&P 500 (SPX) was up 7.2%. Some other indices were up even more, the Dow Jones Transports up 11.7%.

The chart below covers the past 6 months showing the S&P 500 (SPX) in blue and an indicator showing the SPX rate of change (ROC) over the past 10 trading days in black. Dashed vertical lines have been drawn on the 1st trading day of each month.

The indicator hit its highest level in over 4 years on Thursday.

In the past when the indicator hit these levels coming off a bottom there was usually a pull back for a few days before the index continued to move upward.

Intermediate Term

New lows are the best indicator of bottoms.

After a bottom has been reached new lows diminish rapidly and that happened last week.

The first chart covers the past year showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in red. OTC NL has been plotted on an inverted Y axis so increasing new lows moves the indicator downward (up is good).

The indicator has been moving sharply upward suggesting there is little risk right now.

The next chart is similar to the one above except it covers the past 6 months and shows the SPX in blue and an indicator calculated from NYSE new lows (NY NL) in black.

When the SPX retested its August lows in late November the indicator was higher that it was during its August low (non-confirmation). NY NL has been moving sharply upward and there were only 30 new lows on the NYSE Friday, the lowest number since October 10.

Seasonality

Next week is the week prior to the 2nd Friday in December during the 3rd year of the Presidential Cycle.

The tables show the daily change of the OTC and SPX during the week prior to the 2nd Friday of December during the 3rd year of the Presidential Cycle. OTC data covers the period from 1963 - 2003 and SPX data from 1953 - 2003. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Historically this week has been very strong during the 3rd year of the Presidential cycle and weak in all of the other years.

The OTC has only been down once and the SPX down twice during the 3rd year of the Presidential cycle.

The averages over all years have been modestly positive only because of the very strong 3rd year.

Report for the week before the 2nd Friday of Dec
The number following the year is the position in the presidential cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.25% 0.14% 0.26% 0.25% -0.37% 0.03%
 
1967-3 0.87% 0.99% 0.47% 0.37% 0.09% 2.79%
1971-3 -0.32% 0.32% 0.42% 0.24% 0.78% 1.44%
1975-3 0.27% -0.53% 0.98% -0.23% -0.23% 0.26%
1979-3 0.33% -0.09% 0.46% 0.31% 0.71% 1.71%
1983-3 -0.50% -0.16% 0.04% -0.56% -0.02% -1.20%
Avg 0.13% 0.10% 0.47% 0.03% 0.27% 1.00%
 
1987-3 0.63% 1.08% 1.34% -0.38% 0.59% 3.26%
1991-3 -0.18% -0.21% -0.48% 0.82% 0.91% 0.86%
1995-3 1.37% -0.36% -0.39% -0.80% 0.87% 0.69%
1999-3 0.72% 1.15% -0.02% 0.23% 0.72% 2.80%
2003-3 0.57% -2.08% -0.19% 1.98% 0.34% 0.62%
Avg 0.62% -0.08% 0.05% 0.37% 0.69% 1.65%
 
OTC summary for Presidential Year 3 1963 - 2003
Avg 0.32% 0.02% 0.26% 0.20% 0.40% 1.21%
Win% 64% 45% 64% 64% 73% 91%
 
OTC summary for all years 1963 - 2006
Avg 0.05% 0.14% -0.04% -0.31% 0.23% 0.08%
Win% 59% 52% 51% 48% 57% 52%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.57% 0.00% -0.33% 0.59% 0.15% 0.99%
1959-3 0.19% 0.64% -0.62% 0.08% -0.24% 0.06%
1963-3 -0.05% 0.04% -0.12% 0.01% 0.20% 0.08%
 
1967-3 0.63% 0.14% 0.43% -0.12% -0.12% 0.97%
1971-3 -0.57% 0.37% 0.05% 0.04% 0.75% 0.65%
1975-3 0.29% 0.26% 0.89% -0.32% 0.03% 1.16%
1979-3 0.14% -0.17% 0.03% 0.14% 1.16% 1.30%
1983-3 0.20% -0.18% 0.27% -0.43% -0.07% -0.21%
Avg 0.14% 0.09% 0.33% -0.14% 0.35% 0.78%
 
1987-3 2.16% 2.69% 1.69% -2.23% 0.75% 5.07%
1991-3 -0.22% -0.10% -0.05% 1.02% 0.77% 1.41%
1995-3 1.10% 0.65% 0.40% -0.65% 0.21% 1.73%
1999-3 -0.69% -1.00% -0.38% 0.30% 0.64% -1.13%
2003-3 0.73% -0.85% -0.11% 1.15% 0.27% 1.20%
Avg 0.62% 0.28% 0.31% -0.08% 0.53% 1.66%
 
SPX summary for Presidential Year 3 1955 - 2003
Avg 0.35% 0.21% 0.17% -0.03% 0.35% 1.02%
Win% 69% 58% 54% 62% 77% 85%
 
SPX summary for all years 1953 - 2006
Avg 0.11% 0.10% -0.01% -0.26% 0.22% 0.17%
Win% 57% 47% 49% 39% 67% 54%

Mutual Fund

Compliance issues demand that I not mention the mutual fund that I manage by name or symbol in this letter.

To see a current chart of the fund go to: http://finance.yahoo.com/q/bc?s=APHAX&t=6m&l=on&z=m&q=l&c=.

For information about the fund go to: http://www.thealphafunds.com/index.htm. The fund now has service class shares available.

Conclusion

The market is overbought and likely to stall for a few days before continuing to move upward.

I expect the major indices to be higher on Friday December 14 than they were on Friday December 7.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

Gordon Harms produces a Power Point for our local timing group. You can get a copy of that at: http://www.stockmarket-ta.com/.

 

Back to homepage

Leave a comment

Leave a comment