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Technical Market Report for April 28, 2012

The good news is:
• All of the breadth indicators turned upward last week.


The negatives

New highs increased nicely last week and most of the major indices are within 2% of their previous highs. The problem is, if prices continue upward next week, there will be non-confirmations of the new highs by many of the breadth indicators.

The chart below covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH is down to the levels it was at last December and has no chance of confirming a new high in the SPX which is only 1.1% away.

For a little perspective, here is what happened last year.

The next chart is similar to the first one except it shows the NASDAQ composite (OTC) in blue and OTC NH has been calculated from NASDAQ data.

The pattern is similar.

Here is how it looked last year.


The positives

The breadth numbers improved last week and have developed a pattern of higher highs and higher lows.

The chart below covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels of the indicator; the line is solid at the neutral 50% level.

OTC HL Ratio improved to a solidly positive 74%.

The chart below is similar to the one above except it shows the SPX in red and NY HL Ratio, in black, has been calculated from NYSE data.

NY HL Ratio had a robust week.


Seasonality

Next week includes the last trading day of May and the 1st 4 trading days of April during the 4th year of the Presidential Cycle.

The tables below show the return on a percentage basis for the last trading day of May and the 1st 4 trading days of April during the 4th year of the Presidential Cycle.

OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1928 - 2011. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Average returns for the coming week have been positive by all measures, but a little weaker during the 4th year of the Presidential Cycle than other years.

Report for the last 1 day of April and first 4 days of May.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 4
  Day1 Day1 Day2 Day3 Day4 Totals
1964-4 -0.49% 4 -0.05% 5 0.85% 1 -0.36% 2 0.59% 3 0.54%
1968-4 0.30% 2 0.00% 3 0.60% 4 1.39% 5 0.09% 1 2.38%
 
1972-4 0.24% 5 -0.89% 1 -0.63% 2 -0.44% 3 0.12% 4 -1.60%
1976-4 -0.52% 5 -1.14% 1 0.21% 2 0.00% 3 0.20% 4 -1.25%
1980-4 0.46% 3 -0.22% 4 0.41% 5 0.56% 1 0.84% 2 2.05%
1984-4 0.22% 1 1.15% 2 1.09% 3 -0.18% 4 -0.66% 5 1.62%
1988-4 0.12% 5 0.13% 1 0.66% 2 -0.16% 3 -0.55% 4 0.20%
Avg 0.10% -0.19% 0.35% -0.04% -0.01% 0.20%
 
1992-4 1.53% 4 -0.09% 5 0.93% 1 0.78% 2 0.22% 3 3.37%
1996-4 0.19% 2 0.77% 3 -1.78% 4 0.53% 5 0.14% 1 -0.14%
2000-4 2.30% 5 2.52% 1 -4.36% 2 -2.07% 3 0.35% 4 -1.26%
2004-4 -1.97% 5 0.97% 1 0.61% 2 0.35% 3 -1.00% 4 -1.05%
2008-4 -0.55% 3 2.81% 4 -0.15% 5 -0.52% 1 0.78% 2 2.38%
Avg 0.30% 1.40% -0.95% -0.19% 0.10% 0.66%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.15% 0.50% -0.13% -0.01% 0.09% 0.60%
% Winners 67% 50% 67% 42% 75% 58%
MDD 5/3/2000 6.34% -- 4/30/2004 1.97% -- 5/3/1972 1.95%
 
OTC summary for all years 1963 - 2011
Averages 0.24% 0.33% 0.16% 0.07% -0.01% 0.78%
% Winners 67% 63% 69% 60% 57% 65%
MDD 5/6/2010 7.65% -- 5/6/2002 6.50% -- 5/3/2000 6.34%
 
SPX Presidential Year 4
  Day1 Day1 Day2 Day3 Day4 Totals
1928-4 0.00% 1 0.15% 2 0.25% 3 0.50% 4 1.56% 5 2.46%
 
1932-4 0.00% 6 -1.54% 1 -1.39% 2 1.41% 3 -1.05% 4 -2.57%
1936-4 1.77% 4 0.73% 5 -0.50% 6 0.14% 1 1.45% 2 3.59%
1940-4 0.58% 2 -1.31% 3 0.58% 4 0.17% 5 -0.25% 6 -0.24%
1944-4 0.00% 6 0.76% 1 -0.08% 2 0.67% 3 -0.17% 4 1.18%
1948-4 -0.26% 5 -0.26% 6 1.04% 1 -0.06% 2 -0.58% 3 -0.12%
Avg 0.42% -0.33% -0.07% 0.47% -0.12% 0.37%
 
1952-4 -0.72% 3 -0.64% 4 1.68% 5 0.13% 6 0.30% 1 0.74%
1956-4 0.81% 1 -0.45% 2 0.02% 3 0.35% 4 0.35% 5 1.08%
1960-4 -0.35% 5 -0.44% 1 1.29% 2 0.38% 3 -0.33% 4 0.56%
1964-4 -0.30% 4 0.89% 5 0.37% 1 0.51% 2 0.22% 3 1.70%
1968-4 0.13% 2 0.39% 3 0.63% 4 0.07% 5 -0.31% 1 0.91%
Avg -0.09% -0.05% 0.80% 0.29% 0.05% 1.00%
 
1972-4 0.58% 5 -0.91% 1 -0.57% 2 -0.08% 3 0.25% 4 -0.74%
1976-4 -0.48% 5 -0.71% 1 0.50% 2 -0.53% 3 0.28% 4 -0.95%
1980-4 0.41% 3 -0.78% 4 0.11% 5 0.76% 1 -0.12% 2 0.37%
1984-4 0.10% 1 1.02% 2 0.14% 3 -0.43% 4 -1.30% 5 -0.47%
1988-4 -0.49% 5 0.09% 1 0.55% 2 -1.02% 3 -0.59% 4 -1.46%
Avg 0.02% -0.26% 0.14% -0.26% -0.30% -0.65%
 
1992-4 0.71% 4 -0.58% 5 1.06% 1 -0.02% 2 -0.01% 3 1.16%
1996-4 0.00% 2 0.06% 3 -1.71% 4 -0.27% 5 -0.13% 1 -2.05%
2000-4 -0.85% 5 1.09% 1 -1.50% 2 -2.16% 3 -0.40% 4 -3.82%
2004-4 -0.59% 5 0.92% 1 0.18% 2 0.18% 3 -0.67% 4 0.02%
2008-4 -0.38% 3 1.71% 4 0.32% 5 -0.45% 1 0.77% 2 1.96%
Avg -0.22% 0.64% -0.33% -0.54% -0.09% -0.54%
 
SPX summary for Presidential Year 4 1928 - 2008
Averages 0.03% 0.01% 0.14% 0.01% -0.04% 0.16%
% Winners 38% 52% 71% 57% 38% 57%
MDD 5/4/2000 4.01% -- 5/3/1932 2.92% -- 5/6/1996 2.11%
 
SPX summary for all years 1928 - 2011
Averages 0.27% 0.11% 0.17% 0.22% -0.03% 0.72%
% Winners 59% 55% 70% 64% 45% 67%
MDD 5/3/1930 8.27% -- 5/6/2010 6.52% -- 5/2/1934 4.30%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth picked up a little last week.

M2


May

Since 1963, over all years, the OTC in May has been up 55% of the time with an average gain of 0.3%. During the 4th year of the Presidential Cycle May has been up 67% time with no gain or loss. The average return was pulled down by a 14.1% loss in 2000. The best May for the OTC was 1997 (+10.2%), the worst 2000 (-14.1%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in May over all years since 1963 while the black line shows the average during the 4th year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 55% of the time in May with an average loss of -0.3%. During the 4th year of the Presidential Cycle the SPX has been up 67% of the time with an average loss of -1.3% (helped considerably by losses of 22.1% and 22.9% in 1932 and 1940 respectively). The best May for the SPX was 1933 (+14.4%) the worst 1940 (-22.9%). The SPX has not had a double digit % move, either way, in May since 1940.

The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in May in red and the performance during the 4th year of the Presidential Cycle in black.

Since 1979 the R2K has been up 64% of the time in May with an average gain of 1.2%. During the 4th year of the Presidential Cycle the R2K has been up 63% of the time with an average loss of -0.2%. The best May for the R2K, 2003 (+10.6%), the worst 2010 (-9.7%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in May in green and the performance during the 4th year of the Presidential Cycle in black.

Since 1885 the DJIA has been up 51% of the time in May with an average loss of -0.3%. During the 4th year of the Presidential Cycle the DJIA has been up 42% of the time in May with an average loss of -1.5%. The best May for the DJIA 1933 (+13.3%), the worst 1940 (-21.0%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in May in grey and the performance during the 4th year of the Presidential Cycle in black.


Conclusion

The market had a good week and is a little over bought. Seasonality for next week is good and momentum is favorable.

I expect the major averages to be higher on Friday May 4 than they were on Friday April 27.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

In his latest newsletter, Jerry Minton looks at what it takes to be #1 over the long-term. You can get his bi-weekly letter for free by subscribing at the home page at www.alphaim.net.

Good Luck

YTD W 5 /L6 /T 6

 

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