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Technical Market Report

The good news is:
 •  Nearly every indicator that matters turned sharply upward last week just in time for a seasonally strong period.

Everything went right for the market last week.

The first chart pretty much sums it up. It is a FastTrack chart showing the Russell 2000 (R2K) in red, the S&P 500 (SPX) in green and a FastTrack relative strength indicator called Accutrack as a histogram at the bottom in yellow. The R2K is underperforming the SPX when Accutrack is below the neutral line. At the end of last week Accutrack went positive in a dramatic way. For the week the SPX was down 0.05% while the R2K was up 3.01%

The NASDAQ new high indicator (a 10% trend of NASDAQ new highs) in green in the chart below is a good short term indicator of market direction. The dashed vertical magenta lines on the chart below are drawn on the first trading day of the week. As of last Tuesday NASDAQ new highs began increasing sharply. The index (in red) is the NASDAQ composite.

Even bonds appear to be taking off. The red line in the chart below is an average of 150 corporate bond funds in the FastTrack database. The blue line is the percentage of those funds that are above their 4% trend (50 day EMA).

Beginning Monday seasonality turns positive.
Next week is made up of the last 3 trading days of June and the first 2 trading days of July. As you can see in the tables below, both the R2K and SPX have averaged gains of about 1% over this period for the past 15 years.

Last 3 days of June and first 2 days of July.
The number following the year is its position in the presidential cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

R2K Day3 Day2 Day1 Day1 Day2 Totals
1989-1 -0.57% 3 -1.60% 4 -0.39% 5 0.10% 1 0.21% 3 -2.25%
1990-2 0.20% 3 0.70% 4 0.42% 5 -0.07% 1 -0.03% 2 1.22%
1991-3 -0.39% 3 0.36% 4 -0.49% 5 0.63% 1 -0.15% 2 -0.03%
1992-4 0.04% 5 0.60% 1 0.77% 2 0.54% 3 -0.66% 4 1.29%
1993-1 0.77% 1 0.19% 2 0.70% 3 0.33% 4 0.04% 5 2.03%
1994-2 -0.55% 2 0.51% 3 0.05% 4 0.35% 5 -0.16% 2 0.19%
1995-3 -0.12% 3 0.41% 4 0.91% 5 0.02% 1 0.38% 3 1.59%
1996-4 -1.34% 3 0.63% 4 1.36% 5 0.32% 1 -0.22% 2 0.74%
1997-1 -0.24% 4 0.58% 5 0.98% 1 -0.57% 2 0.15% 3 0.90%
1998-2 0.02% 5 0.79% 1 0.78% 2 0.53% 3 -0.33% 4 1.80%
1999-3 1.24% 1 1.22% 2 0.79% 3 -0.71% 4 0.46% 5 3.00%
2000-4 2.54% 3 -1.61% 4 0.91% 5 1.31% 1 -1.10% 3 2.05%
2001-1 0.97% 3 1.50% 4 2.02% 5 -2.75% 1 -0.44% 2 1.29%
2002-2 0.11% 3 1.27% 4 0.85% 5 -3.22% 1 -3.33% 2 -4.31%
2003-3 1.51% 4 -0.26% 5 -0.09% 1 0.18% 2 2.16% 3 3.51%
Averages 0.28% 0.35% 0.64% -0.20% -0.20% 0.87%
Winners 60% 80% 80% 67% 40%  
 
SPX Day3 Day2 Day1 Day1 Day2 Totals
1989-1 -0.80% 3 -1.88% 4 -0.53% 5 0.39% 1 0.44% 3 -2.38%
1990-2 0.87% 3 0.70% 4 0.11% 5 0.42% 1 0.17% 2 2.28%
1991-3 0.25% 3 0.76% 4 -0.87% 5 1.82% 1 -0.12% 2 1.85%
1992-4 0.08% 5 1.36% 1 -0.20% 2 1.16% 3 -0.27% 4 2.14%
1993-1 0.95% 1 -0.26% 2 -0.04% 3 -0.34% 4 -0.71% 5 -0.39%
1994-2 -0.28% 2 0.35% 3 -0.75% 4 0.43% 5 0.04% 2 -0.21%
1995-3 0.42% 3 -0.16% 4 0.16% 5 0.43% 1 0.03% 3 0.89%
1996-4 -0.61% 3 0.63% 4 0.31% 5 0.78% 1 -0.34% 2 0.77%
1997-1 -0.60% 4 0.41% 5 -0.24% 1 0.67% 2 1.46% 3 1.69%
1998-2 0.35% 5 0.47% 1 -0.41% 2 1.30% 3 -0.19% 4 1.52%
1999-3 1.22% 1 1.51% 2 1.57% 3 0.60% 4 0.74% 5 5.65%
2000-4 0.29% 3 -0.85% 4 0.85% 5 1.03% 1 -1.59% 3 -0.27%
2001-1 -0.47% 3 1.25% 4 -0.15% 5 1.00% 1 -0.18% 2 1.46%
2002-2 -0.27% 3 1.76% 4 -0.08% 5 -2.14% 1 -2.12% 2 -2.85%
2003-3 1.08% 4 -0.97% 5 -0.18% 1 0.80% 2 1.16% 3 1.89%
Averages 0.17% 0.34% -0.03% 0.56% -0.10% 0.94%
Winners 60% 67% 33% 87% 47%  

 

The biggest negative for next week is my exuberance, I hope it is not irrational.

I expect the major indices to be higher on Friday July 2 than they were on Friday June 25.

I am calling last weeks negative forecast a loss. The blue chip indices were down slightly, but the small cap indices were up substantially.

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