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Technical Market Report

The good news is:
 • The upcoming week is one of the seasonally strongest of theyear.

The chart below is an update of the one I used last week, it shows the NASDAQ composite in red and an indicator constructed by subtracting momentum of NASDAQ new lows from momentum of new highs in blue. Vertical dashed lines are drawn at the first trading day of each month.

The indicator is short term and nearly binary in its representation of market strength moving sharply upward or downward at turning points.

Like last September, the indicator's recent fall was arrested as the market entered a seasonally strong period.

Summation indices (SI) are a running total of oscillator values. When the oscillator is above 0 the SI rises, when it is below 0 the SI falls. The chart below shows SI's derived from NASDAQ advances - declines, new highs - new lows and upside - downside volume. When the SI's are all heading in the same direction it is imprudent to bet against them. As of last Wednesday they were all heading upward.

Like last week, next week will be influenced by very strong seasonal patterns. Typical of the end of month, beginning of month patterns, the small caps usually outperform the blue chips. During the past 16 years, this period in the 4th year of the presidential cycle has been above average for the small caps and slightly below average for the blue chips.

Last 2 trading days of November and first 3 trading days of December.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

R2K Day2 Day1 Day1 Day2 Day3 Totals
1988-4 0.40% 2 0.97% 3 0.39% 4 0.15% 5 0.48% 1 2.38%
1989-1 -0.25% 3 0.07% 4 0.20% 5 0.05% 1 -0.09% 2 -0.03%
1990-2 0.09% 4 1.12% 5 0.50% 1 0.45% 2 1.53% 3 3.69%
1991-3 -0.03% 3 0.48% 5 0.16% 1 0.42% 2 0.24% 3 1.27%
1992-4 0.27% 5 0.62% 1 0.00% 2 0.19% 3 0.27% 4 1.34%
1993-1 0.00% 1 0.11% 2 0.88% 3 0.12% 4 0.38% 5 1.48%
1994-2 0.41% 2 0.23% 3 -0.91% 4 0.32% 5 0.05% 1 0.10%
1995-3 0.69% 3 0.61% 4 0.38% 5 0.89% 1 0.19% 2 2.76%
1996-4 0.37% 3 0.41% 5 0.35% 1 0.70% 2 0.08% 3 1.90%
1997-1 0.29% 3 0.41% 5 0.99% 1 -0.39% 2 0.31% 3 1.61%
1998-2 0.69% 5 -1.08% 1 0.25% 2 -0.31% 3 -0.63% 4 -1.08%
1999-3 -0.43% 1 -0.63% 2 -0.09% 3 1.49% 4 0.90% 5 1.24%
2000-4 -0.96% 3 -1.90% 4 2.44% 5 -1.41% 1 4.61% 2 2.78%
2001-1 2.12% 4 -0.55% 5 -0.81% 1 2.37% 2 2.48% 3 5.60%
2002-2 2.99% 3 -0.95% 5 0.54% 1 -1.89% 2 -0.82% 3 -0.13%
2003-3 0.39% 3 0.22% 5 1.48% 1 -0.18% 2 -1.52% 3 0.39%
Averages 0.44% 0.01% 0.42% 0.19% 0.53% 1.58%
Winners 69% 69% 75% 69% 75% 81%
 
Presidential year 4
Year Day2 Day1 Day1 Day2 Day3 Totals
1988-4 0.40% 2 0.97% 3 0.39% 4 0.15% 5 0.48% 1 2.38%
1992-4 0.27% 5 0.62% 1 0.00% 2 0.19% 3 0.27% 4 1.34%
1996-4 0.37% 3 0.41% 5 0.35% 1 0.70% 2 0.08% 3 1.90%
2000-4 -0.96% 3 -1.90% 4 2.44% 5 -1.41% 1 4.61% 2 2.78%
Averages 0.02% 0.02% 0.79% -0.09% 1.36% 2.10%
Winners 75% 75% 75% 75% 100% 100%
 
SPX Day2 Day1 Day1 Day2 Day3 Totals
1988-4 0.85% 2 1.03% 3 -0.44% 4 -0.25% 5 1.15% 1 2.33%
1989-1 -0.63% 3 0.70% 4 1.34% 5 0.22% 1 -0.52% 2 1.11%
1990-2 -0.48% 4 1.83% 5 0.58% 1 0.69% 2 1.09% 3 3.72%
1991-3 -0.37% 3 -0.35% 5 1.65% 1 -0.12% 2 -0.23% 3 0.57%
1992-4 0.23% 5 0.28% 1 -0.13% 2 -0.21% 3 0.00% 4 0.17%
1993-1 -0.25% 1 -0.02% 2 0.02% 3 0.26% 4 0.38% 5 0.40%
1994-2 0.22% 2 -0.33% 3 -1.05% 4 0.98% 5 0.00% 1 -0.17%
1995-3 0.20% 3 -0.37% 4 0.27% 5 1.10% 1 0.65% 2 1.84%
1996-4 -0.13% 3 0.27% 5 -0.06% 1 -1.09% 2 -0.42% 3 -1.44%
1997-1 0.09% 3 0.40% 5 2.03% 1 -0.32% 2 0.52% 3 2.72%
1998-2 0.46% 5 -2.41% 1 1.00% 2 -0.34% 3 -1.80% 4 -3.09%
1999-3 -0.62% 1 -1.34% 2 0.63% 3 0.81% 4 1.72% 5 1.20%
2000-4 0.44% 3 -2.01% 4 0.02% 5 0.74% 1 3.89% 2 3.08%
2001-1 1.03% 4 -0.07% 5 -0.84% 1 1.32% 2 2.23% 3 3.68%
2002-2 2.80% 3 -0.27% 5 -0.19% 1 -1.47% 2 -0.35% 3 0.52%
2003-3 0.43% 3 -0.02% 5 1.13% 1 -0.33% 2 -0.18% 3 1.03%
Averages 0.27% -0.17% 0.37% 0.13% 0.51% 1.10%
Winners 63% 38% 63% 50% 63% 81%
 
Presidential year 4
Year Day2 Day1 Day1 Day2 Day3 Totals
1988-4 0.85% 2 1.03% 3 -0.44% 4 -0.25% 5 1.15% 1 2.33%
1992-4 0.23% 5 0.28% 1 -0.13% 2 -0.21% 3 0.00% 4 0.17%
1996-4 -0.13% 3 0.27% 5 -0.06% 1 -1.09% 2 -0.42% 3 -1.44%
2000-4 0.44% 3 -2.01% 4 0.02% 5 0.74% 1 3.89% 2 3.08%
Averages 0.34% -0.11% -0.15% -0.20% 1.15% 1.04%
Winners 75% 75% 25% 25% 75% 75%

The market is entering a seasonally strong week with a lot of momentum.

I expect the major indices to be higher on Friday December 3 than they were on Friday November 26.

The weakness that I expected in the early part of last week did not materialize making last weeks negative forecast a bust.

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