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Technical Market Report

The good news is:
 • The recent "Soft Patch" in the market probably ended lastweek.
 • All of the short and intermediate term indicators have turnedupward.
 • It is unlikely that we will return to the lows of August 12for several months or more.

Last week saw a dramatic decline in new lows on both the NYSE and NASDAQ. New lows on the NASDAQ fell from 198 on Friday August 13 to 32 on Friday August 21. On Thursday August 19 the NASDAQ composite fell, but new lows decreased and new highs increased.

I have been showing a chart of the NASDAQ new low indicator for the past several weeks. Intermediate term long positions should not be taken until the new low indicator has moved upward for at leas five consecutive days. Friday August 21 was the sixth consecutive day the indicator moved sharply upward.

The new low indicator, in blue, is a 10% trend (19 day EMA) of NASDAQ new lows plotted on an inverted Y axis. The index, in red, in the chart below is the NASDAQ composite. The dashed vertical pink lines show weeks.

Summation indices are a running total of oscillator values. The chart below shows summation indices of oscillators calculated from NASDAQ advances - declines, new highs - new lows and upside - downside volume. I have often said it is imprudent to bet against the summation indices when they are all headed in the same direction. As of last week all of the summation indices are heading sharply upward.

The seasonal bias for the week after August options expiration is positive when considering the number of up days relative to down days. The average return for the week has been slightly negative for the small caps and slightly positive for the large caps because the some of the down days have had huge losses while the gains on the up days has been modest.

The week following August options expiration.
The number following the year is the position in the Presidential cycle.

R2K( Russell 2000)
Year Mon Tue Wed Thur Fri
1989-1 -0.73% -0.10% 0.68% 0.76% 0.05%
1990-2 -1.02% -2.34% -1.26% -4.38% 0.99%
1991-3 -2.83% 0.92% 2.48% 0.33% 0.38%
1992-4 -1.33% -0.45% 0.35% 0.57% 0.24%
1993-1 0.00% 0.50% 0.09% -0.23% 0.11%
1994-2 0.02% 0.70% 0.47% 0.20% 0.56%
1995-3 0.39% -0.38% 0.06% -0.26% 0.21%
1996-4 0.13% -0.04% -0.08% 0.75% 0.11%
1997-1 0.04% 1.24% 1.28% -0.48% -0.31%
1998-2 -0.49% -1.00% -2.40% -3.76% -2.07%
1999-3 0.66% -0.03% 0.17% -0.42% -0.82%
2000-4 0.19% 0.18% 0.09% 1.05% 0.35%
2001-1 0.68% -1.38% 1.05% -0.79% 1.56%
2002-2 1.34% -0.86% 2.25% 0.71% -2.33%
2003-3 1.91% 1.62% 0.16% 1.10% -1.88%
Avg -0.08% -0.10% 0.36% -0.32% -0.19%
Win% 64% 40% 80% 53% 67%
 
SPX (S&P 500)
Year Mon Tue Wed Thur Fri
1989-1 -1.55% 0.15% 1.03% 1.98% -0.28%
1990-2 0.21% -2.02% -1.65% -3.00% 1.45%
1991-3 -2.36% 0.79% 2.94% 0.19% 0.73%
1992-4 -1.00% 0.22% 0.46% 0.00% 0.32%
1993-1 -0.20% 1.00% 0.08% 0.20% -0.11%
1994-2 -0.29% 0.47% 0.97% -0.20% 1.22%
1995-3 -0.20% 0.25% -0.43% 0.06% 0.47%
1996-4 0.21% -0.13% -0.09% 0.84% -0.54%
1997-1 1.30% 1.48% 1.44% -1.52% -0.16%
1998-2 0.64% 0.43% -0.79% -3.84% -1.48%
1999-3 1.77% 0.24% 1.34% -1.43% -1.01%
2000-4 0.52% -0.09% 0.52% 0.16% -0.12%
2001-1 0.81% -1.21% 0.70% -0.28% 1.97%
2002-2 2.36% -1.40% 1.27% 1.41% -2.27%
2003-3 0.92% 0.26% -0.20% 0.30% -1.02%
Avg 0.21% 0.03% 0.51% -0.34% -0.06%
Win% 60% 67% 67% 60% 40%

The market has just come off a significant bottom (probably the low for the year).

I expect the major indices to be higher on Friday August 27 than they were on Friday August 20.

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