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Technical market report for September 30, 2017

By: Mike Burk | Monday, October 2, 2017

The good news is:

In the seasonal reports and historical graphs I have limited the daily changes to 2% so the extreme moves such as the crash of 1987 do not distort the graphs and tables.

The Negatives

The market is overbought; otherwise the negatives continue to fade.

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.

The chart is not a good example of a negative because it is moving sharply upward, but it is the best I could find.

However, NY NH did fail to confirm the all time high in the SPX and is below its previous intermediate term high last July so you could say it is in an intermediate term down trend while in a short term uptrend.

If NY NH continues to move like it has for the past 5 weeks, the intermediate down trend will be broken in a few days.



The Positives

All of the major indices are at or near their all time highs, the secondaries are outperforming the blue chips, new highs are soaring and new lows have been insignificant.

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

OTC NH confirmed the all time high in the index Friday.



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 finished the week at a very strong 89.7%.



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 with NYSE data.

NY HL Ratio finished the week at a very strong 93%.



Seasonality

Next week includes the first 5 trading days of October 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 have been positive by all measures.

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 1

               Day1      Day2      Day3      Day4      Day5      Totals

 1965-1      -0.06% 5  -0.17% 1   0.30% 2   0.09% 3   0.21% 4     0.38%

 1969-1       0.42% 3  -0.61% 4   0.36% 5  -0.13% 1   0.38% 2     0.42%

 1973-1      -0.21% 1   0.71% 2   0.33% 3  -0.55% 4   0.94% 5     1.22%

 1977-1       0.31% 1  -0.35% 2   0.01% 3   0.49% 4   0.31% 5     0.76%

 1981-1       0.59% 4   1.81% 5   0.84% 1  -0.02% 2   1.57% 3     4.78%

 1985-1       0.51% 2  -0.22% 3   0.09% 4  -0.34% 5  -0.77% 1    -0.72%

 1989-1       0.48% 1   0.44% 2   0.43% 3   0.28% 4   0.62% 5     2.25%

 1993-1       0.06% 5   0.21% 1  -0.34% 2   0.33% 3  -0.30% 4    -0.04%

 Avg          0.39%     0.38%     0.21%     0.15%     0.28%       1.41%

 1997-1       0.27% 3   0.72% 4   0.79% 5   0.35% 1   0.89% 2     3.02%

 2001-1      -1.22% 1   0.80% 2   2.00% 3   1.04% 4   0.50% 5     3.12%

 2005-1       0.17% 1  -0.75% 2  -1.70% 3  -0.90% 4   0.30% 5    -2.87%

 2009-1      -2.00% 4  -0.46% 5   0.98% 1   1.71% 2   0.32% 3     0.56%

 2013-1       1.23% 2  -0.08% 3  -1.07% 4   0.89% 5  -0.98% 1    -0.01%

 Avg         -0.31%     0.05%     0.20%     0.62%     0.21%       0.76%

OTC summary for Presidential Year 1 1965 - 2013

Averages      0.04%     0.16%     0.23%     0.25%     0.31%       0.99%

% Winners       69%       46%       77%       62%       77%         69%

MDD  10/6/2005  3.31% --  10/2/2009  2.45% --  10/7/2013  1.25%

OTC summary for all years 1963 - 2013

Averages     -0.06%     0.02%     0.15%     0.12%    -0.02%       0.22%

% Winners       51%       56%       61%       61%       57%         61%

MDD 10/7/2008  7.85% --  10/7/2002  7.41% --  10/7/1998  7.31%

SPX Presidential Year 1

               Day1      Day2      Day3      Day4      Day5      Totals

 1929-1      -0.60% 2   0.73% 3  -2.00% 4  -1.04% 5   2.00% 6    -0.90%

 1933-1      -2.00% 1   0.52% 2   2.00% 3  -1.26% 4  -1.08% 5    -1.83%

 1937-1      -0.29% 5   0.29% 6  -1.24% 1  -2.00% 2   2.00% 3    -1.23%

 1941-1      -0.29% 3  -0.29% 4  -0.10% 5   0.00% 6  -0.10% 1    -0.79%

 1945-1       1.05% 1   0.00% 2  -0.18% 3   0.00% 4   0.49% 5     1.36%

 1949-1      -0.39% 6   0.52% 1   0.96% 2   0.19% 3   0.38% 4     1.66%

 1953-1       0.60% 4   0.43% 5  -0.47% 1  -0.38% 2   0.81% 3     0.99%

 Avg          0.14%     0.19%    -0.20%    -0.44%     0.72%       0.40%

 1957-1       0.80% 2   0.80% 3   0.09% 4  -0.81% 5  -1.33% 1    -0.45%

 1961-1       0.06% 1  -0.06% 2   0.67% 3   0.88% 4   0.30% 5     1.85%

 1965-1      -0.07% 5   0.20% 1   0.61% 2  -0.10% 3  -0.08% 4     0.57%

 1969-1      -0.64% 3   0.78% 4  -0.05% 5   0.18% 1  -0.29% 2    -0.03%

 1973-1      -0.20% 1   0.54% 2  -0.01% 3  -0.34% 4   1.33% 5     1.31%

 Avg         -0.01%     0.45%     0.26%    -0.04%    -0.02%       0.65%

 1977-1       0.22% 1  -0.73% 2  -0.36% 3   0.39% 4  -0.08% 5    -0.58%

 1981-1       0.77% 4   1.95% 5   0.13% 1  -0.10% 2   1.61% 3     4.36%

 1985-1       1.64% 2  -0.55% 3   0.16% 4  -0.62% 5  -0.74% 1    -0.10%

 1989-1       0.49% 1   1.09% 2   0.63% 3   0.01% 4   0.51% 5     2.73%

 1993-1       0.51% 5   0.01% 1  -0.03% 2  -0.10% 3  -0.34% 4     0.06%

 Avg          0.73%     0.35%     0.10%    -0.08%     0.19%       1.29%

 1997-1       0.86% 3   0.53% 4   0.47% 5   0.79% 1   1.07% 2     3.73%

 2001-1      -0.23% 1   1.23% 2   1.99% 3  -0.25% 4   0.16% 5     2.91%

 2005-1      -0.17% 1  -1.00% 2  -1.49% 3  -0.41% 4   0.37% 5    -2.70%

 2009-1      -2.00% 4  -0.45% 5   1.49% 1   1.37% 2   0.27% 3     0.68%

 2013-1       0.80% 2  -0.07% 3  -0.90% 4   0.71% 5  -0.85% 1    -0.31%

 Avg         -0.15%     0.05%     0.31%     0.44%     0.21%       0.86%

SPX summary for Presidential Year 1 1929 - 2013

Averages      0.04%     0.29%     0.11%    -0.13%     0.29%       0.60%

% Winners       50%       64%       50%       36%       59%         55%

MDD  10/5/1937  3.21% --  10/6/2005  3.04% --  10/4/1929  3.02%

SPX summary for all years 1928 - 2016

Averages      0.04%     0.20%     0.19%     0.03%     0.08%       0.53%

% Winners       49%       66%       55%       55%       52%         61%

MDD 10/7/2008  7.45% --  10/7/2002  6.81% --  10/7/1966  4.22%

October

Since 1963, over all years, the OTC in October has been up 56% of the time with an average gain of 0.9%.  During the 1st year of the Presidential Cycle October has been up 54% time with an average gain of 2.2% (helped considerably by an 11.7% gain in 1969 and a 12.8% gain in 2001).  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 green line shows the average during the 1st year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 58% of the time in October with an average gain of 0.5%.  During the 1st year of the Presidential Cycle the SPX has been up 50% of the time with an average loss of -1.1%.  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 1st year of the Presidential Cycle in green.



Since 1979 the Russell 2000 (R2K) has been up 55% of the time in October with an average loss of -0.3%.  During the 1st year of the Presidential Cycle the R2K has been up 56% of the time with an average gain of 0.2%.  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 1st year of the Presidential Cycle in green.



Since 1885 the DJIA has been up 56% of the time in October with an average gain of 0.3%.  During the 1st year of the Presidential Cycle the DJIA has been up 55% of the time in October with an average loss of -0.5%.  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 1st year of the Presidential Cycle in green.



Conclusion

The market is overbought; otherwise everything is going in the right direction.

I expect the major averages to be higher on Friday October 6 than they were on Friday September 29.

By Mike Burk 

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