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Technical Market Report

The good news is:
The market is oversold going into a seasonally strong period.

The McClellan Oscillator (MCO) is calculated by subtracting a 5% trend (39 day exponential moving average) from a 10% trend (19 day exponential moving average). The chart below shows the NASDAQ composite along with a MCO of the NASDAQ AD line (The AD line (ADL) is a running total of daily number of declining issues subtracted from advancing issues). The decline last week was enough to bring the Oscillator to its 4th lowest level since the rally began in March.

The next chart shows the Russell 2000 (R2K) along with an indicator calculated by dividing the number of new highs by new highs + new lows. New highs and new lows are calculated on the issues in the R2K over the trailing 30 trading days rather than 52 weeks as reported by the exchanges.

The chart shows the indicator reached its 3rd. lowest level since the rally began.

It should be noted that both of the indicators shown above have turned upward. It would not be surprising to have a bounce off the current oversold levels.

The seasonal aspects of the coming week can be viewed in two ways:
1) The week of Thanksgiving.
2) The last 4 trading days of November.

The tables below offer both perspectives. There are two tables for each period, the first showing the R2K and the second showing the S&P 500 (SPX).

 • 3 days before Thanksgiving and 1 day after.
 • Day1 = the day after.
 • The number following the % change represents the day of the week1=Monday, 5=Friday etc.
 • The number following the year is the year of the presidential cycle.

R2K Day4 Day3 Day2 Day1 Totals
1988-4 -0.65% 1 -0.06% 2 0.39% 3 -0.19% 5 -0.51% 
1989-1 -0.58% 1 -0.40% 2 0.34% 3 0.43% 5 -0.21% 
1990-2 0.38% 1 -0.47% 2 -0.08% 3 0.18% 5 0.00% 
1991-3 -0.70% 1 -0.31% 2 -0.03% 3 0.48% 5 -0.56% 
1992-4 -0.02% 1 0.51% 2 0.53% 3 0.27% 5 1.30% 
1993-1 -1.65% 1 0.51% 2 0.69% 3 0.13% 5 -0.32% 
1994-2 -0.72% 1 -1.84% 2 -0.68% 3 0.59% 5 -2.65% 
1995-3 -0.53% 1 -0.36% 2 0.04% 3 0.34% 5 -0.52% 
1996-4 0.68% 1 -0.26% 2 0.37% 3 0.41% 5 1.19% 
1997-1 -1.66% 1 -0.22% 2 0.29% 3 0.41% 5 -1.17% 
1998-2 0.98% 1 -0.39% 2 0.69% 3 0.69% 5 1.97% 
1999-3 -0.11% 1 -1.37% 2 0.33% 3 0.66% 5 -0.49% 
2000-4 -2.56% 1 -0.73% 2 -1.90% 3 3.05% 5 -2.15% 
2001-1 1.42% 1 -0.83% 2 -0.35% 3 1.35% 5 1.59% 
2002-2 1.21% 1 -1.61% 2 2.99% 3 -0.95% 5 1.65% 
Averages -0.30% -0.52% 0.24% 0.52% -0.06%
% Winners 33% 13% 67% 87%  

 

SPX Day4 Day3 Day2 Day1 Totals
1988-4 -0.09% 1 0.37% 2 0.67% 3 -0.66% 5 0.29% 
1989-1 -0.66% 1 0.07% 2 0.68% 3 0.60% 5 0.69% 
1990-2 0.70% 1 -1.26% 2 0.23% 3 -0.29% 5 -0.63% 
1991-3 -0.21% 1 0.70% 2 -0.37% 3 -0.35% 5 -0.24% 
1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.82% 
1993-1 -0.75% 1 0.41% 2 0.29% 3 0.15% 5 0.10% 
1994-2 -0.69% 1 -1.79% 2 -0.04% 3 0.52% 5 -1.99% 
1995-3 -0.54% 1 0.57% 2 -0.31% 3 0.26% 5 -0.01% 
1996-4 1.11% 1 -0.14% 2 -0.13% 3 0.27% 5 1.11% 
1997-1 -1.70% 1 0.44% 2 0.09% 3 0.40% 5 -0.79% 
1998-2 2.12% 1 -0.44% 2 0.33% 3 0.46% 5 2.47% 
1999-3 -0.07% 1 -1.15% 2 0.89% 3 -0.03% 5 -0.37% 
2000-4 -1.84% 1 0.35% 2 -1.85% 3 1.47% 5 -1.87% 
2001-1 1.09% 1 -0.73% 2 -0.49% 3 1.17% 5 1.04% 
2002-2 0.25% 1 -2.10% 2 2.80% 3 -0.27% 5 0.68% 
Averages -0.11% -0.27% 0.21% 0.26% 0.09%
% Winners 33% 53% 60% 67%  

You can see for the past 15 years Thanksgiving week has has been pretty flat. It starts out weak and ends strong. For small caps the day after Thanksgiving is about as close as you can get to a sure thing.

Viewed as simply the last 4 trading days of November the picture is a little better.

Last 4 days of November

R2K Day4 Day3 Day2 Day1 Totals
1989-1 0.18% 1 0.17% 2 -0.25% 3 0.07% 4 0.17% 
1990-2 1.01% 2 0.60% 3 0.09% 4 1.12% 5 2.81% 
1991-3 -0.70% 1 -0.31% 2 -0.03% 3 0.48% 5 -0.56% 
1992-4 0.51% 2 0.53% 3 0.27% 5 0.62% 1 1.93% 
1993-1 0.69% 3 0.13% 5 0.00% 1 0.11% 2 0.92% 
1994-2 0.59% 5 0.27% 1 0.41% 2 0.23% 3 1.50% 
1995-3 0.32% 1 0.46% 2 0.69% 3 0.61% 4 2.08% 
1996-4 0.68% 1 -0.26% 2 0.37% 3 0.41% 5 1.19% 
1997-1 -1.66% 1 -0.22% 2 0.29% 3 0.41% 5 -1.17% 
1998-2 -0.39% 2 0.69% 3 0.69% 5 -1.08% 1 -0.09% 
1999-3 0.33% 3 0.66% 5 -0.43% 1 -0.63% 2 -0.08% 
2000-4 -0.04% 1 -2.69% 2 -0.96% 3 -1.90% 4 -5.59% 
2001-1 -0.11% 2 -1.52% 3 2.12% 4 -0.55% 5 -0.06%
2002-2 1.21% 1 -1.61% 2 2.99% 3 -0.95% 5 1.65% 
Averages 0.19% -0.22% 0.45% -0.08% 0.34%
% Winners 64% 57% 64% 64%  

 

SPX  Day4 Day3 Day2  Day1 Totals
1989-1 0.48% 1 0.05% 2 -0.63% 3 0.70% 4 0.59% 
1990-2 0.50% 2 -0.05% 3 -0.48% 4 1.83% 5 1.81% 
1991-3 -0.21% 1 0.70% 2 -0.37% 3 -0.35% 5 -0.24% 
1992-4 0.58% 2 0.37% 3 0.23% 5 0.28% 1 1.46% 
1993-1 0.29% 3 0.15% 5 -0.25% 1 -0.02% 2 0.17% 
1994-2 0.52% 5 0.41% 1 0.22% 2 -0.33% 3 0.84% 
1995-3 0.23% 1 0.85% 2 0.20% 3 -0.37% 4 0.90% 
1996-4 1.11% 1 -0.14% 2 -0.13% 3 0.27% 5 1.11% 
1997-1 -1.70% 1 0.44% 2 0.09% 3 0.40% 5 -0.79% 
1998-2 -0.44% 2 0.33% 3 0.46% 5 -2.41% 1 -2.06% 
1999-3 0.89% 3 -0.03% 5 -0.62% 1 -1.34% 2 -1.11% 
2000-4 0.54% 1 -0.95% 2 0.44% 3 -2.01% 4 -1.99% 
2001-1 -0.68% 2 -1.83% 3 1.03% 4 -0.07% 5 -1.54% 
2002-2 0.25% 1 -2.10% 2 2.80% 3 -0.27% 5 0.68% 
Averages 0.17% -0.13% 0.21% -0.26% -0.01%
% Winners 71%  57% 57% 36%  

For the past several months the market has been exhibiting a cyclic pattern lasting about a month. There was a low in late September, late October and it appears to be coming off a low now. We are also entering a period of modest seasonal strength.

I expect the major indices will be higher at the close Friday November 28 than they were at the close Friday November 21.

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