"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 5 hours Foreign Investors Losing Interest In The U.S.
  • 6 hours Chinese Police Bust $1.5B Crypto Gambling Scheme
  • 7 hours Can Artificial Intelligence Compete With Real Doctors?
  • 8 hours UK Stocks Bounce Back From Worst Selloff In Years
  • 9 hours Geopolitical Uncertainty Weighs On Global Markets
  • 11 hours Gold May Still Be On Its Way Down
  • 13 hours Bionic Cells: The Future Of Solar Energy?
  • 1 day The Biggest Winners Of Q2 Earnings Season
  • 2 days Experts Suggest A Gold Shortage May Be Looming
  • 3 days The World Is Drowning In $247 Trillion Debt
  • 3 days Tightening Immigration Policy Could Hurt The Tech Sector
  • 3 days The First Bitcoin ETF Might Be Just Months Away
  • 3 days U.S. Rent Costs Hit All-Time High
  • 3 days European Allies Plan To Continue Trade With Iran
  • 4 days Bitcoin Bounces Off Key Resistance Level
  • 4 days These 3 Industries Are Immune To The Trade War
  • 4 days Is This The Answer To The Looming U.S. Healthcare Crisis?
  • 4 days UK Regulators Hit Facebook With £500,000 Fine
  • 4 days Tesla’s U.S. Tax Credit Coming To An End
  • 4 days Ex-Goldman Banker Caught In A Billion Dollar Fraud Scandal
These 3 Industries Are Immune To The Trade War

These 3 Industries Are Immune To The Trade War

U.S. President Donald Trump has…

The Biggest Winners Of Q2 Earnings Season

The Biggest Winners Of Q2 Earnings Season

The second quarter of 2018…

Technical Market Report

The good news is:
• We are close to an intermediate term low.

Short Term

The market is overbought.

The chart below covers the past 3 months showing the S&P 500 (SPX) in red and an indicator showing the percentage of the last 3 days that have been up (%UP) in black. Dashed vertical lines have been drawn on the 1st trading day of each month.

%UP touches the top of the chart when the SPX has been up for 3 consecutive days and it touches the bottom of the chart when the SPX has been down for 3 consecutive days. Counting last Friday the SPX has been up for 3 consecutive days for the 4th time since the July lows and each previous occurrence was followed by a short term reversal. More than 3 consecutive days in either direction often marks a change in the direction of the trend. In early September the SPX was down for 4 consecutive days.

Intermediate Term

The extreme number of new lows at the July low implies a high likelihood of a retest of those lows. Many indices including the AMEX composite, Dow Jones Utilities, NDX, NASDAQ composite (OTC) and S&P mid cap touched or exceeded their July lows last week. The research I did on retests only looked at the Dow Jones Industrial Average (DJIA) and that index has yet to retest its July low. Currently the DJIA is 4.2% off its July low.

The chart below covers the past 6 months showing the DJIA in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

Since the 1st of September NY NL has been falling sharply. The retest is likely to come soon.

Although I think it is likely the retest will hold, there is nothing to imply that.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of September during the 4th year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the 5 trading days prior to the 3rd Friday of September during the 4th year of the Presidential Cycle. OTC data covers the period from 1963 - 2007 and SPX data from 1953 - 2007. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.

On average next week has had modest gains by all measures.

Report for the week before the 3rd Friday of September.
The number following the year is the position in the presidential cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.26% 0.14% -0.12% 0.29% 0.31% 0.88%
 
1968-4 -0.07% 0.60% 0.00% 0.31% -0.13% 0.72%
1972-4 -0.67% -0.84% 0.26% 0.05% 0.07% -1.13%
1976-4 -0.25% -0.47% 0.11% 0.45% 0.63% 0.46%
1980-4 0.01% 0.91% 1.38% -0.18% 0.89% 3.01%
1984-4 -0.08% -0.55% -0.39% 0.05% -0.18% -1.15%
Avg -0.21% -0.07% 0.34% 0.14% 0.26% 0.38%
 
1988-4 0.12% 0.08% 0.38% -0.30% 0.32% 0.61%
1992-4 1.92% -1.07% -0.34% 0.33% 0.22% 1.07%
1996-4 0.45% 0.78% 0.20% 0.53% 0.63% 2.58%
2000-4 -2.06% -1.20% 1.15% 0.51% -2.01% -3.61%
2004-4 0.85% 0.26% -0.99% 0.40% 0.32% 0.84%
Avg 0.26% -0.23% 0.08% 0.29% -0.11% 0.30%
 
OTC summary for Presidential Year 4 1964 - 2004
Avg 0.04% -0.12% 0.17% 0.22% 0.10% 0.39%
Win% 55% 55% 60% 82% 73% 73%
 
OTC summary for all years 1963 - 2007
Avg 0.06% 0.12% 0.04% 0.08% 0.31% 0.60%
Win% 44% 51% 57% 62% 71% 60%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.04% -0.85% -1.18% -0.06% 0.80% -1.33%
1960-4 -0.61% 0.11% -0.70% -0.40% -0.20% -1.79%
1964-4 -0.28% -0.26% 0.29% 0.66% -0.37% 0.04%
 
1968-4 0.38% 0.26% 0.00% 0.09% 0.07% 0.79%
1972-4 -0.58% -0.95% 0.40% 0.03% -0.11% -1.22%
1976-4 -0.34% -0.34% 0.30% 1.05% 0.88% 1.55%
1980-4 0.10% 0.85% 1.68% -0.36% 0.66% 2.93%
1984-4 0.05% -0.72% -0.42% 0.32% -1.07% -1.85%
Avg -0.08% -0.18% 0.49% 0.22% 0.09% 0.44%
 
1988-4 -0.14% 0.36% 0.70% -0.44% 0.94% 1.43%
1992-4 1.36% -1.29% 0.04% 0.00% 0.71% 0.82%
1996-4 0.51% -0.15% -0.22% 0.23% 0.59% 0.95%
2000-4 -0.35% -0.49% 0.20% -0.27% -1.02% -1.93%
2004-4 0.17% 0.22% -0.71% 0.28% 0.45% 0.42%
Avg 0.31% -0.27% 0.00% -0.04% 0.34% 0.34%
 
SPX summary for Presidential Year 4 1956 - 2004
Avg 0.02% -0.25% 0.03% 0.09% 0.18% 0.06%
Win% 46% 38% 58% 62% 62% 62%
 
SPX summar for all years 1953 - 2007
Avg 0.12% 0.07% 0.10% 0.07% 0.12% 0.49%
Win% 51% 53% 61% 58% 58% 60%

Money supply (M2)

The chart below was provided by Gordon Harms. Money supply growth has fallen below the elevated trend of the past 2 years.

Conclusion

The market is overbought and likely to sell off over the next few days. The sell off could be deep enough to qualify as a retest of the July lows for the DJIA. The retest could be the low for the remainder of the year.

I expect the major indices to be lower on Friday September 19 than they were on Friday September 12.

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.

Thank you,

 

Back to homepage

Leave a comment

Leave a comment