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Technical Market Report

The good news is:
 • All of the intermediate term indicators are still moving sharplyupward.

Summation indices (SI) are running totals of oscillator values. When the oscillator is positive the SI moves upward when the oscillator is negative the SI moves downward. The chart below shows SI's derived from oscillators of the component issues of the Russell 2000 index (R2K) advances & declines, new highs & new lows and upside & downside volume. All of the SI's are moving sharply upward.

Now the rest of the story.

At turning points you can see a slight lag in the SI's. This is because it takes the oscillators a day or two to cross the 0 line. In the chart below the oscillator (in pink) is calculated by subtracting a 22 day EMA from an 11 day EMA of new highs and new lows of the component issues of the R2K. New highs and new lows have been calculated over the past 30 trading days rather than 52 weeks as reported by the exchanges to make the indicator more sensitive. The oscillator is well above the 0 line (dashed in blue) and the SI (in green) is heading sharply upward. A third indicator in blue shows momentum of the oscillator. Momentum indicators, for the most part, call your attention to the obvious. In this case, the high low oscillator is weakening. In the same chart about three months earlier the oscillator stalled for a week or so and the momentum indicator went negative as a rally was beginning. It is imprudent to jump the gun reacting to indicators of indicators, on the other hand, the market has gone straight up for the past 5 weeks and some of the indicators are weakening so caution is suggested.

The chart below shows the Russell 2000 (R2K) in red, the S&P 500 (SPX) in green and Accutrack (a FastTrack relative strength indicator) as a histogram in yellow. Accutrack is about as high as it has been at any time in the past year. These high points in the past have all preceded tradable declines.

Seasonally next week is a bad one. The S&P 500 (SPX) has been up only 19% of the time in the past 15 years while the R2K has been up 38% of the time, however, gains in the up years have been small compared to the losses in the down years and both indices have averaged losses of about 1% for the week.

Report for the week after witching Friday of September.
Witching is futures and options expiration the 3rd Friday of the month.
The number following the year is the position in the presidential cycle.

R2K
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.12% 0.07% -0.08% -0.14% 0.14% -0.13%
1989-1 -0.18% -0.01% -0.09% 0.12% 0.22% 0.07%
1990-2 -2.51% 0.11% -1.43% -1.92% 0.44% -5.31%
1991-3 -0.29% 0.13% -0.04% 0.09% -0.25% -0.36%
1992-4 -0.08% -0.54% -0.07% 0.36% -1.05% -1.38%
1993-1 -0.05% -0.88% 1.15% 0.59% 0.32% 1.14%
1994-2 -0.29% -0.98% -0.81% -0.02% -0.29% -2.38%
1995-3 -0.30% 0.17% 0.30% -0.38% -0.49% -0.71%
1996-4 -0.36% 0.31% 0.31% 0.37% 0.15% 0.79%
1997-1 0.40% 0.10% -0.19% -0.15% 0.21% 0.38%
1998-2 -0.17% 1.54% 2.11% -1.53% -0.33% 1.62%
1999-3 -0.29% -1.55% 0.24% -1.71% -0.74% -4.05%
2000-4 -2.67% 1.28% -0.36% -1.36% 0.87% -2.24%
2001-1 -1.80% 1.06% 2.84% 0.92% -0.50% 2.53%
2002-2 -2.34% -0.59% 2.40% 1.52% -2.40% -1.41%
2003-3 -1.26% 1.11% -2.21% -2.52% -1.97% -6.86%
Avg -0.77% 0.08% 0.25% -0.36% -0.35% -1.14%
Win% 06% 63% 44% 44% 44% 38%
 
SPX
Year Mon Tue Wed Thur Fri Totals
1988-4 -0.68% 0.34% 0.16% -0.35% 0.20% -0.33%
1989-1 0.48% -0.05% -0.02% -0.22% 0.39% 0.58%
1990-2 -2.16% 1.20% -1.04% -1.34% 1.69% -1.65%
1991-3 -0.52% 0.46% -0.21% -0.10% -0.15% -0.52%
1992-4 -0.19% -1.18% 0.07% 0.25% -0.98% -2.04%
1993-1 -0.82% -0.46% 0.72% 0.34% -0.02% -0.25%
1994-2 -0.07% -1.59% -0.41% -0.04% -0.35% -2.46%
1995-3 -0.10% 0.25% 0.44% -0.64% -0.22% -0.27%
1996-4 -0.08% -0.13% 0.03% 0.00% 0.05% -0.12%
1997-1 0.52% -0.37% -0.78% -0.70% 0.78% -0.55%
1998-2 0.37% 0.56% 3.54% -2.19% 0.19% 2.48%
1999-3 0.01% -2.09% 0.22% -2.30% -0.24% -4.40%
2000-4 -1.45% 1.07% -0.59% -0.16% -0.02% -1.15%
2001-1 -0.23% 1.23% 1.99% -0.25% 0.16% 2.91%
2002-2 -1.38% -1.73% 2.49% 1.82% -3.23% -2.03%
2003-3 -1.30% 0.61% -1.91% -0.61% -0.64% -3.85%
Avg -0.47% -0.12% 0.29% -0.41% -0.15% -0.85%
Win% 25% 50% 56% 25% 44% 19%

There is still no evidence of a market turning point, but after 5 consecutive up weeks the market is ripe for a pullback as we enter a seasonally weak period.

I expect the major indices to be lower on Friday September 24 than they were on Friday September 17.

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