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Technical Market Report

The good news is:
 • Most of the broad based indices are at major support levels.
 • End of month seasonality strength should help next week.

The NDX, Russell 2000 (R2K), Dow Jones Industrial average, S&P 500 (SPX), Russell 1000 and Wilshire 5000 to name a few are all within 1% of their May lows. The Nasdaq composite is 1.4% below its May low. If there is anything to support - resistance levels there should be, at least, some slowing of the decline next week.

The chart below is typical of many this week in that it shows an indicator near its low of the past year. In this case the indicator is momentum of a running total of NASDAQ advancing volume - declining volume (an AD line of volume).

I have often said that it is imprudent to bet against the direction of the summation indices when they are all going in the same direction. The chart below shows summation indices constructed from NASDAQ advances & declines, up/down volume and new highs & new lows. They are all heading downward as are the similar indices constructed from NYSE data. Summation indices are an accumulation of oscillator values.

Seasonally the last week in July is pretty good. Unlike most seasonally strong periods, the blue chips have been significantly stronger than the secondaries as the tables below show.

Last 5 days of July
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 Day5 Day4 Day3 Day2 Day1 Totals
1989-1 -0.12% 2 0.35% 3 0.48% 4 -0.06% 5 0.22% 1 0.87%
1990-2 0.28% 3 0.24% 4 -0.55% 5 -0.75% 1 -0.27% 2 -1.06%
1991-3 0.23% 4 0.06% 5 0.00% 1 0.53% 2 0.71% 3 1.53%
1992-4 0.07% 1 0.93% 2 0.78% 3 0.44% 4 0.47% 5 2.68%
1993-1 0.56% 1 -0.20% 2 0.36% 3 0.22% 4 -0.03% 5 0.92%
1994-2 0.01% 1 -0.16% 2 -0.39% 3 -0.12% 4 0.96% 5 0.31%
1995-3 0.45% 2 0.48% 3 0.89% 4 0.16% 5 0.16% 1 2.14%
1996-4 1.23% 4 0.96% 5 -0.46% 1 0.13% 2 0.78% 3 2.65%
1997-1 0.09% 5 0.03% 1 0.29% 2 0.87% 3 0.25% 4 1.53%
1998-2 -1.24% 1 -1.30% 2 -0.32% 3 0.78% 4 -2.27% 5 -4.34%
1999-3 -1.23% 1 0.82% 2 0.03% 3 -1.13% 4 0.72% 5 -0.79%
2000-4 0.02% 2 -0.10% 3 -2.37% 4 -2.27% 5 2.12% 1 -2.61%
2001-1 0.58% 3 1.69% 4 -0.01% 5 -0.06% 1 0.01% 2 2.21%
2002-2 -0.12% 4 1.10% 5 4.85% 1 0.02% 2 -2.12% 3 3.74%
2003-3 0.78% 5 1.06% 1 -0.05% 2 -0.17% 3 0.68% 4 2.30%
Averages 0.11% 0.40% 0.25% -0.09% 0.16% 0.80%
Winners 73% 73% 50% 53% 73% 73%
 
SPX Day5 Day4 Day3 Day2 Day1 Totals
1989-1 0.06% 2 1.25% 3 1.17% 4 0.05% 5 1.15% 1 3.67%
1990-2 0.37% 3 -0.33% 4 -0.69% 5 0.60% 1 0.17% 2 0.11%
1991-3 0.61% 4 -0.01% 5 0.58% 1 0.92% 2 0.29% 3 2.40%
1992-4 -0.01% 1 1.45% 2 1.13% 3 0.40% 4 0.07% 5 3.04%
1993-1 0.45% 1 -0.19% 2 -0.23% 3 0.68% 4 -0.47% 5 0.23%
1994-2 0.25% 1 -0.20% 2 -0.17% 3 0.37% 4 0.88% 5 1.14%
1995-3 0.80% 2 0.09% 3 0.64% 4 -0.41% 5 -0.15% 1 0.98%
1996-4 0.72% 4 0.75% 5 -0.78% 1 0.69% 2 0.74% 3 2.11%
1997-1 -0.16% 5 -0.25% 1 0.62% 2 1.06% 3 0.21% 4 1.49%
1998-2 0.57% 1 -1.48% 2 -0.45% 3 1.58% 4 -1.95% 5 -1.74%
1999-3 -0.68% 1 1.12% 2 0.19% 3 -1.78% 4 -0.92% 5 -2.07%
2000-4 0.70% 2 -1.50% 3 -0.19% 4 -2.05% 5 0.77% 1 -2.27%
2001-1 1.61% 3 1.04% 4 0.24% 5 -0.11% 1 0.56% 2 3.34%
2002-2 -0.56% 4 1.69% 5 5.41% 1 0.42% 2 0.98% 3 7.94%
2003-3 1.74% 5 -0.22% 1 -0.73% 2 -0.18% 3 0.29% 4 0.90%
Averages 0.43% 0.22% 0.45% 0.15% 0.17% 1.42%
Winners 73% 47% 53% 67% 73% 80%

I am a little uncomfortable making a positive forecast with the majority of the indicators heading downward, but you could not find a better case for a "bounce". By any measure the market is oversold as we enter a seasonally strong period.

I expect the major indices to be higher on Friday July 30 than they were on Friday July 23.

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