• 369 days Will The ECB Continue To Hike Rates?
  • 369 days Forbes: Aramco Remains Largest Company In The Middle East
  • 371 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 771 days Could Crypto Overtake Traditional Investment?
  • 776 days Americans Still Quitting Jobs At Record Pace
  • 778 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 781 days Is The Dollar Too Strong?
  • 781 days Big Tech Disappoints Investors on Earnings Calls
  • 782 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 784 days China Is Quietly Trying To Distance Itself From Russia
  • 784 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 788 days Crypto Investors Won Big In 2021
  • 788 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 789 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 791 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 792 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 795 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 796 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 796 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 798 days Are NFTs About To Take Over Gaming?
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Technical Market Report

The good news is:

  • There have been virtually no new lows on either the NYSE or NASDAQ.
  • Many of the indicators are about as low as they have been at any time since the rally began last March.
  • The market remains in a seasonally strong period, at least for the first part of next week.

Market tops develop relatively slowly. Part of that development includes a build up of new lows. There has been a rule of thumb that says there is little risk until new lows exceed 40 for several days. That rule of thumb has held up well since the 60's in spite of the number of issues more that tripling over the same period. Last week the number of new lows on the NYSE peaked Wednesday at 8 while NASDAQ new lows peaked Thursday at 10.

New highs hit their lowest levels in quite a while last Thursday at 118 on the NYSE and 77 on the NASDAQ. Several successful intermediate term timing systems have no sell filters based on a 10% trend of new highs. When the value of the 10% trend of new highs is above a specified setting, no selling is allowed. These filters are usually based on NYSE new highs and an aggressive level would be around 100 while a conservative level would be around 130, i.e. if the value of the 10% trend of new highs is above 100-130 no selling is allowed. The current level of the 10% trend of NYSE new highs is 367 and NASDAQ new highs is 240. If there were no new highs it would take those indicators several weeks to get down to levels that would permit selling.

The chart below shows momentum of (upside volume / upside volume + downside volume) of the component issues of the Russell 2000 (R2K). The indicator is near its lowest level since the rally began last March. From extreme levels like we currently see, the indicator has been good at identifying short term bottoms. It has not turned yet, but, one strong day will take care of that.

The next chart shows the percentage out of the previous 4 trading days an advance - decline line constructed from the component issues of the R2K has been up. The indicator reaches the top of the chart when there have been 4 consecutive up days and the bottom of the chart when there have been 4 consecutive down days. The indicator is at the bottom of the chart for the fifth time since the rally began in March. The previous 4 have been starting points for significant rallies.

The next chart shows momentum of (advancing issues / advancing issues + declining issues) of the S&P 500 (SPX). Like the previous charts the indicator is near its lowest level since the rally began.

The charts above are typical of the most of the charts I looked at. The indicators are at or near the lower end of their ranges since the rally began in March and they have not yet turned around. A turn is likely in the next day or two and the rally should be tradable.

As you can see in the tables below, we remain in a seasonally strong period through Wednesday. Seasonality did not help last week, but now the market is clearly oversold, which should help next week.

First five trading days of February.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.
The number following the year is its position in the presidential cycle

R2K Day1 Day2 Day3 Day4 Day5 Totals
1989-1 0.34% 3 0.36% 4 0.48% 5 -0.07% 1 0.81% 2 1.93%
1990-2 0.72% 4 1.06% 5 0.57% 1 0.01% 2 0.86% 3 3.22%
1991-3 0.92% 5 1.83% 1 1.38% 2 1.39% 3 -0.79% 4 4.72%
1992-4 0.34% 1 0.95% 2 0.73% 3 0.42% 4 -0.07% 5 2.37%
1993-1 0.41% 1 0.29% 2 0.98% 3 0.17% 4 -0.80% 5 1.05%
1994-2 -0.01% 2 0.42% 3 -0.02% 4 -2.21% 5 0.00% 1 -1.81%
1995-3 0.26% 3 0.45% 4 0.87% 5 0.66% 1 0.21% 2 2.46%
1996-4 0.62% 4 0.13% 5 0.23% 1 0.53% 2 -0.23% 3 1.27%
1997-1 0.07% 1 -0.38% 2 -0.77% 3 0.00% 4 0.35% 5 -0.73%
1998-2 1.02% 1 0.78% 2 0.92% 3 0.50% 4 0.32% 5 3.54%
1999-3 -0.27% 1 -1.02% 2 0.47% 3 -1.40% 4 -1.21% 5 -3.43%
2000-4 1.52% 2 1.22% 3 2.30% 4 0.75% 5 1.31% 1 7.09%
2001-1 0.13% 4 -1.56% 5 -0.06% 1 1.00% 2 0.26% 3 -0.23%
2002-2 -0.63% 5 -2.07% 1 -0.27% 2 -1.37% 3 -0.87% 4 -5.21%
2003-3 -0.52% 1 -0.41% 2 -0.47% 3 -0.61% 4 -1.63% 5 -3.65%
Averages 0.33% 0.14% 0.49% -0.02% -0.10% 0.84%
Winners 73% 67% 67% 60% 53%  
 
SPX Day1 Day2 Day3 Day4 Day5 Totals
1989-1 -0.13% 3 -0.08% 4 0.04% 5 -0.31% 1 1.21% 2 0.73%
1990-2 -0.09% 4 0.65% 5 0.28% 1 -0.66% 2 1.24% 3 1.42%
1991-3 -0.26% 5 1.54% 1 0.84% 2 1.94% 3 -0.43% 4 3.63%
1992-4 0.18% 1 1.05% 2 0.00% 3 0.00% 4 -0.66% 5 0.57%
1993-1 0.85% 1 0.01% 2 1.05% 3 0.53% 4 -0.14% 5 2.30%
1994-2 -0.41% 2 0.50% 3 -0.27% 4 -2.27% 5 0.42% 1 -2.04%
1995-3 0.00% 3 0.51% 4 1.24% 5 0.52% 1 -0.07% 2 2.19%
1996-4 0.38% 4 -0.41% 5 0.88% 1 0.76% 2 0.56% 3 2.17%
1997-1 0.07% 1 0.32% 2 -1.39% 3 0.24% 4 1.21% 5 0.45%
1998-2 2.14% 1 0.47% 2 0.09% 3 -0.33% 4 0.89% 5 3.26%
1999-3 -0.52% 1 -0.86% 2 0.80% 3 -1.85% 4 -0.73% 5 -3.17%
2000-4 1.06% 2 -0.01% 3 1.12% 4 -0.04% 5 -0.01% 1 2.13%
2001-1 0.55% 4 -1.75% 5 0.36% 1 -0.15% 2 -0.84% 3 -1.83%
2002-2 -0.71% 5 -2.47% 1 -0.40% 2 -0.60% 3 -0.31% 4 -4.49%
2003-3 0.54% 1 -1.41% 2 -0.54% 3 -0.64% 4 -1.01% 5 -3.07%
Averages 0.24% -0.13% 0.27% -0.19% 0.09% 0.28%
Winners 53% 53% 67% 33% 40%  

Unlike last week, next week is more typical of seasonally strong periods in that the secondaries are normally stronger than the blue chips. It is notable that, for the past three years, seasonality has not helped the first week of February.

The current oversold condition along with help from seasonality leads me to expect the major averages will be higher at the close Friday February 6 than they were at the close Friday January 30.

Last weeks forecast was another spectacular miss further enhancing my reputation as a contrary indicator.

Back to homepage

Leave a comment

Leave a comment