The good news is:
• New lows remained at non threatening levels.
The negatives
Friday was an up day for all of the major indices, but new highs declined on both the NYSE and NASDAQ. On the NASDAQ new lows hit their high for the week on Friday.
The chart below is a up date of one I show often covering the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio) in red. Dashed vertical lines have been drawn on the 1st trading day of each month. Dashed horizontal lines have been drawn at 10% levels of the indicator; the line is solid at the neutral 50% level.
Although Friday was an up day for the indices, new lows exceeded new highs on the NASDAQ and OTC HL Ratio turned down.
Volume everywhere continues to deteriorate; on the NYSE it hit a 9 year low.
The charts below cover different periods showing the S&P 500 (SPX) in red and a 5% trend (39 day EMA) of NYSE total volume (NY Tot Vol T) in black.
The chart below shows NY Tot Vol T hitting a low for the past 6 months.
The next chart is similar to the one above except it covers the past 10 years.
The secondaries lead both up and down and last week the blue chips were up and the secondaries were down.
The positives
New lows remained at non threatening levels.
On the NASDQ new lows picked up a little from the previous week hitting a high of 43 on Friday. A rule of thumb is NASDAQ new lows are not an issue until they exceed 70.
The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in black. OTC NL has been plotted on an inverted Y axis so decreasing new lows moves the indicator upward (up is good).
OTC NL moved sharply upward last week.
The next chart is similar to the first chart at the top of the page except is shows the SPX in red and NY HL Ratio in black. NY HL Ratio has been calculated from NYSE data.
Although I have issues with NYSE data, this indicator at a current value of 95% is so high it suggests there should be no big problems in the near future.
Advance decline lines (ADL) are a running total of declining issues subtracted from advancing issues.
The chart below covers the past 6 months showing the SPX in red and the NYSE ADL in blue. The NYSE ADL hit an all time high on Friday.
Seasonality
Next week includes the 5 trading days prior to the 3rd Friday of September during the 2nd year of the Presidential Cycle.
The tables below show the return on a percentage basis for the 5 trading days prior to the 3rd Friday of September during the 2nd year of the Presidential Cycle. OTC data covers the period from 1963 - 2009 and SPX data from 1953 - 2009. There are summaries for both the 2nd year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.
Average returns by all measures have been positive.
Report for the week before the 3rd Friday of September.
The number following the year is the position in the presidential cycle.
Daily returns from Monday through 3rd Friday.
| OTC Presidential Year 2 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1966-2 | -0.08% | 1.31% | 0.15% | 0.91% | 0.63% | 2.93% |
| 1970-2 | 0.09% | -0.13% | -1.14% | 0.20% | 1.15% | 0.18% |
| 1974-2 | 1.02% | 0.84% | 0.69% | 2.41% | 0.64% | 5.60% |
| 1978-2 | 0.43% | 0.21% | 0.01% | -0.65% | -0.71% | -0.72% |
| 1982-2 | 0.24% | 0.93% | 0.93% | 0.26% | -0.10% | 2.25% |
| 1986-2 | -0.27% | -0.63% | 0.94% | 0.49% | 0.24% | 0.77% |
| Avg | 0.30% | 0.24% | 0.28% | 0.54% | 0.24% | 1.62% |
| 1990-2 | -0.08% | -0.51% | -0.14% | -1.95% | -0.60% | -3.28% |
| 1994-2 | -0.49% | 0.77% | 0.36% | 1.31% | -0.10% | 1.85% |
| 1998-2 | 1.47% | 0.72% | 0.73% | -2.58% | 1.06% | 1.40% |
| 2002-2 | -1.20% | -1.25% | -0.62% | -2.85% | 0.38% | -5.54% |
| 2006-2 | 0.34% | 1.96% | 0.53% | 0.05% | 0.31% | 3.19% |
| Avg | 0.01% | 0.34% | 0.17% | -1.21% | 0.21% | -0.48% |
| OTC summary for Presidential Year 2 1966 - 2006 | ||||||
| Avg | 0.13% | 0.38% | 0.22% | -0.22% | 0.26% | 0.78% |
| Win% | 55% | 64% | 73% | 64% | 64% | 73% |
| OTC summary for all years 1963 - 2009 | ||||||
| Avg | -0.01% | 0.15% | -0.04% | 0.17% | 0.37% | 0.65% |
| Win% | 45% | 53% | 57% | 62% | 72% | 62% |
| SPX Presidential Year 2 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1954-2 | 0.91% | 0.51% | 0.03% | 0.54% | 0.79% | 2.79% |
| 1958-2 | 0.89% | 0.80% | -0.04% | -0.51% | 0.65% | 1.79% |
| 1962-2 | 0.32% | -0.08% | -0.14% | -0.70% | -1.45% | -2.05% |
| 1966-2 | 2.12% | 0.53% | 1.03% | 1.20% | -0.11% | 4.77% |
| 1970-2 | -0.55% | -0.87% | 0.53% | 0.61% | 0.40% | 0.13% |
| 1974-2 | 1.63% | 1.69% | 0.50% | 3.50% | 0.07% | 7.39% |
| 1978-2 | 0.18% | 0.01% | -0.61% | -1.17% | -0.93% | -2.52% |
| 1982-2 | 1.05% | 0.70% | 0.97% | -0.42% | -0.99% | 1.32% |
| 1986-2 | 0.55% | -0.09% | -0.02% | 0.27% | -0.04% | 0.67% |
| Avg | 0.57% | 0.29% | 0.28% | 0.56% | -0.30% | 1.40% |
| 1990-2 | 0.30% | 0.26% | -0.63% | -1.62% | -0.05% | -1.74% |
| 1994-2 | -0.42% | 0.28% | 0.27% | 1.28% | -0.76% | 0.65% |
| 1998-2 | 2.04% | 0.78% | 0.75% | -2.54% | 0.12% | 1.14% |
| 2002-2 | 0.14% | -1.97% | -0.46% | -3.01% | 0.25% | -5.05% |
| 2006-2 | 0.05% | 1.04% | 0.38% | -0.14% | 0.27% | 1.61% |
| Avg | 0.42% | 0.08% | 0.06% | -1.20% | -0.04% | -0.68% |
| SPX summary for Presidential Year 2 1954 - 2006 | ||||||
| Avg | 0.66% | 0.26% | 0.18% | -0.19% | -0.13% | 0.78% |
| Win% | 86% | 71% | 57% | 43% | 50% | 71% |
| SPX summary for all years 1953 - 2009 | ||||||
| Avg | 0.05% | 0.10% | 0.04% | 0.14% | 0.19% | 0.53% |
| Win% | 51% | 54% | 61% | 58% | 60% | 61% |
Money Supply (M2)
The money supply chart was provided by Gordon Harms. Money supply growth picked up last week.
Conclusion
There is little to recommend the current market. It is a little overbought and the secondaries have been underperforming the blue chips.
I expect the major averages to be lower on Friday September 17 than they were on Friday September 10.
Last week the blue chips were up a little while the secondaries were down a little so I am calling last week's positive forecast a tie.
This report is free to anyone who wants it, so please tell your friends. Theycan sign up at: http://alphaim.net/signup.html
Gordon Harms produces a Power Point for our local timing group meetings. You can get a copy of the latest one at: http://www.stockmarket-ta.com/
In his latest newsletter, Jerry Minton looks at a specific investment problem that confronts many retirees...male vs. female longevity and its effect on decision-making. You can view this article at www.alphaim.net and sign up for the free newsletter.
Thank you,
