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Technical Market Report

The good news is:
• With commodity prices falling, our enemies are going broke.

Short Term

Many of the short term indicators are off the charts, trying to read anything into them is too risky. Last week Alan Greenspan admitted to making mistakes.

Intermediate term

On Friday there were 1125 new lows on the NYSE and 788 on the NASDAQ as all of the major indices hit new lows. Amazingly 1125 new lows on the NYSE (the 14th highest number ever recorded) could be seen as a non confirmation of the 2901 new lows on October 10. Except for a few occurrences in the late 90's, whenever new lows exceeded about 15% of issues traded there has been a retest.

The chart below covers the past year showing the S&P 500 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.

The number of new lows has been large enough that any rally is likely to be followed by a retest. I have no means of projecting the ultimate bottom.

Seasonality

Next week includes the last 5 trading days of October during the 4th year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the last 5 trading days of October during the 4th year of the Presidential Cycle. NASDAQ composite (OTC) data covers the period from 1963 - 2007 and SPX data from 1928 - 2007. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Over all years returns have been modestly positive, during the 4th year of the Presidential Cycle SPX returns have been modestly positive while OTC returns have been modestly negative.

Last 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 4
  Day5 Day4 Day3 Day2 Day1 Totals
1964-4 0.00% 1 -0.07% 2 0.11% 3 -0.11% 4 0.14% 5 0.07%
 
1968-4 -0.63% 4 -0.76% 5 -0.32% 1 -0.75% 2 -0.68% 4 -3.14%
1972-4 -0.02% 3 0.37% 4 0.12% 5 -0.05% 1 0.60% 2 1.03%
1976-4 0.12% 1 0.06% 2 0.22% 3 0.26% 4 0.56% 5 1.22%
1980-4 -0.93% 1 -0.30% 2 0.38% 3 -1.02% 4 0.14% 5 -1.73%
1984-4 -0.73% 4 -0.65% 5 -0.36% 1 0.39% 2 -0.17% 3 -1.52%
Avg -0.44% -0.26% 0.01% -0.24% 0.09% -0.83%
 
1988-4 -0.29% 2 -0.24% 3 -0.89% 4 0.27% 5 -0.09% 1 -1.23%
1992-4 0.27% 1 -0.33% 2 0.74% 3 0.74% 4 -0.11% 5 1.32%
1996-4 -0.36% 5 -0.55% 1 -1.05% 2 0.26% 3 1.27% 4 -0.43%
2000-4 -5.56% 3 1.32% 4 0.19% 5 -2.65% 1 5.58% 2 -1.12%
2004-4 -0.06% 1 0.77% 2 2.14% 3 0.29% 4 -0.04% 5 3.10%
Avg -1.20% 0.19% 0.23% -0.22% 1.32% 0.33%
 
OTC summary for Presidential Year 4 1964 - 2004
Averages -0.74% -0.03% 0.12% -0.22% 0.65% -0.22%
% Winners 18% 36% 64% 55% 55% 45%
MDD 10/30/2000 6.68% -- 10/31/1968 3.10% -- 10/29/1996 1.95%
 
OTC summary for all years 1963 - 2007
Averages -0.49% 0.04% -0.13% 0.21% 0.57% 0.20%
% Winners 39% 42% 60% 53% 71% 53%
MDD 10/28/1987 11.13% -- 10/31/1978 8.29% -- 10/27/1997 7.01%
 
SPX Presidential Year 4
  Day5 Day4 Day3 Day2 Day1 Totals
1928-4 -1.19% 5 1.02% 6 0.59% 1 -1.09% 2 -0.37% 3 -1.03%
1932-4 1.92% 3 0.87% 4 2.01% 5 -1.27% 6 -0.57% 1 2.97%
1936-4 1.68% 2 0.06% 3 1.53% 4 0.17% 5 -0.12% 6 3.33%
1940-4 1.12% 6 -0.37% 1 0.19% 2 0.83% 3 1.47% 4 3.23%
1944-4 -0.78% 4 0.16% 5 0.31% 6 -0.23% 1 0.16% 2 -0.39%
Avg 0.55% 0.35% 0.93% -0.32% 0.11% 1.62%
 
1948-4 0.06% 2 -0.12% 3 -0.66% 4 0.24% 5 0.24% 6 -0.24%
1952-4 0.25% 1 0.17% 2 0.08% 3 0.00% 4 1.53% 5 2.03%
1956-4 -0.17% 4 0.92% 5 0.28% 1 -0.06% 2 -1.70% 3 -0.75%
1960-4 -0.76% 2 1.43% 3 1.07% 4 -0.39% 5 -0.04% 1 1.32%
1964-4 -0.16% 1 0.00% 2 -0.36% 3 0.05% 4 0.15% 5 -0.33%
Avg -0.16% 0.48% 0.08% -0.03% 0.04% 0.41%
 
1968-4 -0.70% 4 0.35% 5 -0.29% 1 -0.58% 2 0.11% 4 -1.11%
1972-4 -0.08% 3 0.24% 4 -0.33% 5 -0.03% 1 0.90% 2 0.70%
1976-4 0.11% 1 0.99% 2 0.69% 3 -0.15% 4 1.27% 5 2.91%
1980-4 -1.52% 1 0.13% 2 -0.11% 3 -1.27% 4 0.93% 5 -1.83%
1984-4 -0.53% 4 -0.61% 5 -0.31% 1 1.25% 2 -0.45% 3 -0.65%
Avg -0.54% 0.22% -0.07% -0.15% 0.55% 0.00%
 
1988-4 0.04% 2 -0.35% 3 -1.46% 4 0.45% 5 0.16% 1 -1.17%
1992-4 0.98% 1 0.08% 2 0.39% 3 0.17% 4 -0.52% 5 1.11%
1996-4 -0.19% 5 -0.52% 1 0.61% 2 -0.09% 3 0.62% 4 0.43%
2000-4 -2.38% 3 -0.03% 4 1.11% 5 1.38% 1 2.20% 2 2.28%
2004-4 -0.08% 1 1.49% 2 1.29% 3 0.18% 4 0.24% 5 3.12%
Avg -0.33% 0.13% 0.39% 0.42% 0.54% 1.15%
 
SPX summary for Presidential Year 4 1928 - 2004
Averages -0.12% 0.29% 0.33% -0.02% 0.31% 0.80%
% Winners 40% 65% 65% 45% 65% 55%
MDD 10/30/1980 2.74% -- 10/26/2000 2.41% -- 10/31/1932 1.83%
 
SPX summary for all years 1928 - 2007
Averages -0.46% 0.00% -0.06% 0.36% 0.28% 0.12%
% Winners 36% 59% 54% 56% 59% 54%
MDD 10/29/1929 21.78% -- 10/26/1987 8.28% -- 10/31/1933 6.96%

Conclusion

Recent rallies have been impressive 1 day affairs, but the market has not had 3 consecutive up days since September 12.

I expect the major indices to be Lower on Friday October 31 than they were on Friday October 24.

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

 

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