• 268 days Could Crypto Overtake Traditional Investment?
  • 273 days Americans Still Quitting Jobs At Record Pace
  • 275 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 278 days Is The Dollar Too Strong?
  • 278 days Big Tech Disappoints Investors on Earnings Calls
  • 279 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 280 days China Is Quietly Trying To Distance Itself From Russia
  • 281 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 285 days Crypto Investors Won Big In 2021
  • 285 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 286 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 288 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 289 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 292 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 293 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 293 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 295 days Are NFTs About To Take Over Gaming?
  • 296 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 299 days What’s Causing Inflation In The United States?
  • 300 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Technical Market Report

The good news is:
• Seasonally next week has been one of the strongest of the year.

Short Term

I will start with a happy chart.

The chart below covers the past 100 trading days 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 indicator hit a multi month high on Thursday suggesting prices are heading higher.

Unfortunately there is a problem with NYSE data. Over the years the number of fixed income issues on the NYSE has been increasing. Without outside influence (such as changing interest rates) fixed income issues accumulate value daily until they pay their dividend (monthly or quarterly) when they decline in value by the amount of the dividend. Over the past 29 years that I have been watching the NYSE breadth indicators I have seen them go from having a slightly negatively bias to a wildly positive bias.

The next chart is similar to the one above except is shows the NASADAQ composite (OTC) in blue and the indicator (OTC NH) calculated from NASDAQ new highs in green.

OTC NH is unremarkable.

The next chart is pretty ugly, it shows the Russell 2000 (!RUT - R2K) in red and an indicator showing new lows calculated from the component issues of the R2K (NL) over the past 15 trading days in blue. NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good). Unfortunately NL has been trending downward.

Intermediate term

The next chart is also an update of one I have shown for the past 2 weeks covering the past 100 trading days showing the OTC in blue and an indicator showing a 40% trend (4day EMA) of the ratio of NASDAQ new highs to new lows (NH / (NH + NL)) in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50% level. The indicator fell on Thursday after rising in the early part of the week. Nothing really bad is likely to happen as long as the indicator is above the 50% level.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of July during the 1st year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the 5 trading days prior to the 2nd Friday of July during the 1st year of the Presidential Cycle. OTC data covers the period from 1963 - 2008 and S&P 500 (SPX) data from 1953 - 2008. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

The coming week has to be one of the best of the year. The averages have been up by all measures over the coming week and the OTC has only been down only once during the 1st year of the Presidential Cycle, in 1969.

Report for the week before the 2nd Friday of July.
The number following the year is the position in the presidential cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.00% 0.82% -0.28% -0.06% 0.83% 1.31%
 
1969-1 -0.01% -0.87% -0.44% 0.37% 0.79% -0.15%
1973-1 0.53% 1.17% 1.49% 0.47% -0.14% 3.53%
1977-1 0.00% 0.22% -0.16% 0.32% 0.53% 0.91%
1981-1 0.15% -0.46% 0.46% 0.56% 0.35% 1.05%
1985-1 -0.26% -0.22% 0.46% 0.67% 0.62% 1.27%
Avg 0.10% -0.03% 0.36% 0.48% 0.43% 1.32%
 
1989-1 0.06% 0.41% 0.52% 0.24% 0.23% 1.46%
1993-1 0.00% -0.32% -0.49% 0.56% 0.44% 0.19%
1997-1 1.42% 1.19% 2.50% -0.74% -1.33% 3.04%
2001-1 1.13% -3.15% 0.47% 5.26% 0.44% 4.14%
2005-1 0.00% 1.04% -0.49% 0.34% 1.79% 2.69%
Avg 0.87% -0.17% 0.50% 1.13% 0.31% 2.30%
 
OTC summary for Presidential Year 1 1965 - 2005
Avg 0.43% -0.02% 0.37% 0.73% 0.41% 1.77%
Win% 71% 55% 55% 82% 82% 91%
 
OTC summary for all years 1963 - 2008
Avg -0.02% -0.13% 0.24% 0.26% 0.37% 0.72%
Win% 67% 48% 58% 65% 74% 65%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 0.08% 0.53% -0.04% -0.29% -0.08% 0.21%
1957-1 0.43% -0.37% 0.68% -0.39% 0.45% 0.80%
1961-1 -0.09% -0.03% -0.56% -0.70% 0.65% -0.74%
1965-1 0.00% -0.20% -0.38% 0.85% 0.37% 0.65%
 
1969-1 -1.27% -0.33% 1.00% 0.61% -0.85% -0.84%
1973-1 0.85% 1.35% 2.20% -0.28% -1.34% 2.78%
1977-1 0.00% -0.01% -0.51% 0.35% -0.14% -0.31%
1981-1 0.21% 0.01% 0.46% 0.07% 0.32% 1.07%
1985-1 -0.31% -0.46% 0.69% 0.30% 0.18% 0.40%
Avg -0.13% 0.11% 0.77% 0.21% -0.36% 0.62%
 
1989-1 0.65% 0.54% 0.31% 0.04% 0.57% 2.12%
1993-1 0.00% -0.99% 0.32% 1.31% -0.11% 0.53%
1997-1 0.19% 0.80% 1.17% -0.53% -1.75% -0.12%
2001-1 0.69% -1.44% -0.11% 2.37% 0.62% 2.13%
2005-1 0.00% 0.88% -0.83% 0.25% 1.17% 1.46%
Avg 0.51% -0.04% 0.17% 0.69% 0.10% 1.22%
 
SPX summary for Presidential Year 1 1953 - 2005
Avg 0.14% 0.02% 0.31% 0.28% 0.01% 0.72%
Win% 70% 43% 57% 64% 57% 71%
SPX summary for all years 1953 - 2008
Avg -0.05% -0.04% 0.18% 0.13% 0.27% 0.49%
Win% 58% 45% 56% 60% 68% 64%

Money supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth turned down last week.

Conclusion

Brief sharp declines occur in up markets and, although nasty, I think that is what Thursday's move was. Seasonally the pattern for next week has been a little weakness early in the week with a strong finish. I think the seasonal pattern is likely to be followed.

I expect the major indices to be higher on Friday July 10 than they were on Thursday July 2.

Last weeks positive forecast was a miss. 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