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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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Technical Market Report

The good news is:
 •  The market held up pretty well last week in spite of goodexcuses to go down.

The market appears comatose.

The chart below covers 1 year and shows the NASDAQ composite in red and a 4% trend (55 day EMA) of NASDAQ volume of advancing issues in green. Volume of NASDAQ advancing issues is at its lowest level of the past year last week.

One of my favorite indicators for identifying short term market direction is a 10% trend (19 day EMA) of NASDAQ new highs. This indicator, like the market, has been flat since the first of June.

The indicator, in blue, on the chart below is calculated by putting a momentum indicator on an oscillator of NASDAQ new highs and new lows. The indicator has done a fairly good job of smoothing out the day to day zig zags of the market and sometimes leads turns by a few days. Since the first of the year, declines in this indicator have been accompanied by price declines. Since the first of June prices have remained flat while the indicator has declined sharply indicating underlying strength in prices. This indicator is approaching its lowest level of the current year and is still heading sharply downward.

The week following June options expiration has historically been a little weak.

Report for the week following options expiration in June.
The number following the year is the position in the presidential cycle.

Russell 2000
Year Mon Tue Wed Thur Fri
1989-1 -0.23% -0.21% -0.26% 0.22% 0.48%
1990-2 -1.27% -0.21% -0.10% 0.13% -0.26%
1991-3 -1.84% -0.58% -0.39% 0.36% -0.49%
1992-4 -0.96% 0.26% -0.30% -0.24% 0.04%
1993-1 -0.31% -0.10% -0.16% 0.27% 0.53%
1994-2 -1.32% -1.20% 0.48% -1.13% -1.28%
1995-3 0.51% 0.11% 0.07% 0.57% -0.12%
1996-4 0.47% -0.69% -1.34% 0.63% 1.36%
1997-1 -0.71% 0.63% -0.53% -0.24% 0.58%
1998-2 0.74% 1.31% 0.89% -0.27% 0.02%
1999-3 0.99% -0.47% -0.06% -0.87% -0.01%
2000-4 1.76% 0.56% 0.37% -2.39% -0.89%
2001-1 -0.93% -0.37% 1.46% 0.39% -1.84%
2002-2 -0.43% -1.45% 0.11% 1.27% 0.85%
2003-3 -2.26% 0.34% 0.53% 1.51% -0.26%
Avg -0.39% -0.14% 0.05% 0.01% -0.09%
Win% 33% 40% 47% 60% 47%
 
S&P 500
Year Mon Tue Wed Thur Fri
1989-1 `0.17% -0.20% -0.24% 0.57% 1.76%
1990-2 -1.66% 0.45% 0.18% 0.38% -1.40%
1991-3 -1.80% -0.08% 0.25% 0.76% -0.87%
1992-4 -0.07% 0.16% -0.05% -0.18% 0.08%
1993-1 0.57% -0.06% -0.61% 0.77% 0.22%
1994-2 -0.65% -0.91% 0.39% -0.76% -1.52%
1995-3 1.00% -0.04% -0.18% 1.30% -0.25%
1996-4 0.30% -0.06% -0.61% 0.63% 0.31%
1997-1 -2.23% 2.02% -0.82% -0.60% 0.41%
1998-2 0.24% 1.47% 1.20% -0.32% 0.35%
1999-3 0.46% -0.97% -0.21% -1.30% -0.04%
2000-4 1.47% -0.68% 0.22% -1.82% -0.74%
2001-1 -0.49% 0.34% 0.87% 1.14% -0.94%
2002-2 0.36% -1.67% -0.27% 1.76% -0.08%
2003-3 -1.41% 0.18% -0.83% 1.08% -0.97%
Avg -0.25% 0.00% -0.05% 0.23% -0.24%
Win% 53% 40% 40% 60% 40%

There is no conviction for either direction and the seasonal bias for next week is slightly negative.

I expect the major indices will be lower on Friday June 25 than they were on Friday June 18.

I am calling last weeks negative forecast a draw. Some of the indices were up slightly and some were down.

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