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Technical Market Report

The good news is:
•  With exceptions in the energy group virtually every short and intermediateterm indicator in every sector turned upward last week.

Summation indices (SI) are a running total of oscillator values. When an oscillator is above 0 it's SI rises when it is below 0 it's SI falls. The direction of SI's offers a good intermediate term indicator of market direction. The chart below shows the NASDAQ composite along with SI's of oscillators calculated from advancing - declining issues, new highs and new lows and advancing - declining volume. All of SI's turned upward last week.

The energy group offers a break from the tedium of chart after chart pointing upward. The chart below shows the same indicators as the one above, except they are calculated from the component issues of the Amex Oil Index (XOI). New high and new low data were calculated over the trailing 6 weeks rather than 52 weeks as reported by the exchanges. The energy sector was the only negative exception.

This time of year the market often gets into a rhythm of rising around the end of the month and falling during the middle of the month. The two charts below show the NASDAQ composite along with an indicator showing momentum of NASDAQ new highs. The indicator does a good job of exaggerating that monthly rhythm. The charts both cover 6 months, the first ends last Friday while the second shows last year through the end of the year. I moved the second chart two months to the right so that July - October line up. If the pattern holds, there should be weakness the second and third weeks of November, a Thanksgiving rally into December then weakness in early December followed by the Santa Claus rally beginning just before Christmas.

Seasonally the first 5 trading days of November are strong, but in the 4th year of the presidential cycle the average gain has been only about half of that during all years combined.

First 5 days of November.
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 4 year presidential
cycle.

R2K Day1 Day2 Day3 Day4 Day5 Totals
1988-4 -0.03% 2 -0.16% 3 0.11% 4 -0.60% 5 -1.02% 1 -1.70%
1989-1 0.21% 3 -0.34% 4 0.08% 5 -0.97% 1 0.02% 2 -1.00%
1990-2 0.08% 4 1.20% 5 0.79% 1 0.01% 2 -0.78% 3 1.29%
1991-3 -0.19% 5 -0.41% 1 0.05% 2 0.22% 3 0.78% 4 0.45%
1992-4 0.50% 1 -0.14% 2 -0.04% 3 0.61% 4 0.39% 5 1.33%
1993-1 0.12% 1 0.26% 2 -1.18% 3 -1.56% 4 0.00% 5 -2.35%
1994-2 -0.60% 2 0.11% 3 0.16% 4 -0.55% 5 -0.36% 1 -1.25%
1995-3 0.49% 3 1.11% 4 0.60% 5 0.05% 1 -0.49% 2 1.75%
1996-4 -0.24% 5 0.04% 1 -0.01% 2 0.76% 3 0.54% 4 1.09%
1997-1 1.78% 1 0.30% 2 0.55% 3 -0.43% 4 -1.72% 5 0.48%
1998-2 2.29% 1 0.19% 2 1.39% 3 0.97% 4 0.89% 5 5.74%
1999-3 0.74% 1 0.13% 2 1.40% 3 0.33% 4 0.57% 5 3.18%
2000-4 -0.50% 3 2.38% 4 0.15% 5 -0.75% 1 0.41% 2 1.69%
2001-1 1.57% 4 -0.42% 5 1.03% 1 1.20% 2 -0.45% 3 2.93%
2002-2 2.66% 5 0.92% 1 -0.23% 2 1.73% 3 -2.44% 4 2.64%
2003-3 1.82% 1 0.19% 2 0.01% 3 0.75% 4 0.00% 5 2.77%
Averages 0.67% 0.34% 0.30% 0.11% -0.24% 1.19%
Winners 69% 69% 75% 63% 53% 75%
 
R2K - Presidential year breakdown
Year 4 Day1 Day2 Day3 Day4 Day5 Totals
1988-4 -0.03% 2 -0.16% 3 0.11% 4 -0.60% 5 -1.02% 1 -1.70%
1992-4 0.50% 1 -0.14% 2 -0.04% 3 0.61% 4 0.39% 5 1.33%
1996-4 -0.24% 5 0.04% 1 -0.01% 2 0.76% 3 0.54% 4 1.09%
2000-4 -0.50% 3 2.38% 4 0.15% 5 -0.75% 1 0.41% 2 1.69%
Averages -0.07% 0.53% 0.05% 0.01% 0.08% 0.60%
Winners 25% 50% 50% 50% 75% 75%
 
SPX Day1 Day2 Day3 Day4 Day5 Totals
1988-4 0.03% 2 0.00% 3 0.05% 4 -1.04% 5 -0.86% 1 -1.81%
1989-1 0.25% 3 -0.80% 4 -0.25% 5 -1.48% 1 0.66% 2 -1.63%
1990-2 0.99% 4 1.57% 5 0.88% 1 -0.94% 2 -1.80% 3 0.70%
1991-3 -0.29% 5 -0.27% 1 -0.40% 2 0.32% 3 0.96% 4 0.33%
1992-4 0.97% 1 -0.67% 2 -0.67% 3 0.29% 4 -0.18% 5 -0.25%
1993-1 0.27% 1 -0.14% 2 -1.16% 3 -1.19% 4 0.45% 5 -1.77%
1994-2 -0.83% 2 -0.41% 3 0.30% 4 -1.20% 5 0.17% 1 -1.97%
1995-3 0.47% 3 0.94% 4 0.14% 5 -0.36% 1 -0.36% 2 0.83%
1996-4 -0.21% 5 0.42% 1 1.05% 2 1.46% 3 0.42% 4 3.14%
1997-1 2.66% 1 0.19% 2 0.21% 3 -0.50% 4 -1.12% 5 1.44%
1998-2 1.18% 1 -0.07% 2 0.70% 3 1.36% 4 0.63% 5 3.80%
1999-3 -0.65% 1 -0.47% 2 0.53% 3 0.57% 4 0.56% 5 0.54%
2000-4 -0.57% 3 0.50% 4 -0.11% 5 0.39% 1 -0.02% 2 0.18%
2001-1 2.29% 4 0.29% 5 1.44% 1 1.45% 2 -0.27% 3 5.20%
2002-2 1.72% 5 0.82% 1 0.78% 2 0.91% 3 -2.29% 4 1.94%
2003-3 0.79% 1 -0.54% 2 -0.14% 3 0.59% 4 -0.46% 5 0.25%
Averages 0.57% 0.09% 0.21% 0.04% -0.22% 0.68%
Winners 69% 47% 63% 56% 44% 69%
 
SPX - Presidential year breakdown
Year 4 Day1 Day2 Day3 Day4 Day5 Totals
1988-4 0.03% 2 0.00% 3 0.05% 4 -1.04% 5 -0.86% 1 -1.81%
1992-4 0.97% 1 -0.67% 2 -0.67% 3 0.29% 4 -0.18% 5 -0.25%
1996-4 -0.21% 5 0.42% 1 1.05% 2 1.46% 3 0.42% 4 3.14%
2000-4 -0.57% 3 0.50% 4 -0.11% 5 0.39% 1 -0.02% 2 0.18%
Averages 0.05% 0.08% 0.08% 0.28% -0.16% 0.31%
Winners 50% 67% 50% 75% 25% 50%

Every broad market indicator that matters turned upward last week and seasonally the first week in November has been strong.

I expect the major indices to be higher on Friday November 5 than they were on Friday October 29.

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