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Technical Market Report for June 9, 2012

The good news is:
• New lows declined significantly this past week.


The negatives

The 4th year of the Presidential Cycle has been, on average, weak until the end of July and this year has been a little weaker than average.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH turned up modestly while the major indices were up about 4% last week.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH has been calculated from NYSE data.

NY NH was a little stronger than OTC NH.

If the rally is going to have legs new highs must expand.


The positives

New lows dried up early last week.

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 moved sharply upward last week.

The next chart is similar to the one above except it shows the SPX in red and NY HL Ratio (In dark blue) has been calculated from NYSE data.

NY HL Ratio is slightly more positive than OTC HL Ratio and rose above the neutral level.

The next chart shows the OTC in blue and a 10% trend of NASDAQ new lows (OTC NL) in orange. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

OTC NL did not confirm last Monday's price low and moved up sharply the remainder of the week.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of June during the 4th year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the 5 trading days prior to the 3rd Friday of June during the 4th year of the Presidential Cycle.

OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1953 - 2011. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.

Average returns for the coming week have been negative by all measures. The market has been following the seasonal pattern pretty closely with about a 1 week lag.

Report for the week before the 3rd Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 -0.13% 0.18% 0.46% 0.69% 0.05% 1.25%
1968-4 -0.34% -1.15% 0.00% -0.76% -0.14% -2.40%
 
1972-4 -0.15% 0.31% 0.51% -0.12% -0.01% 0.54%
1976-4 0.79% 0.06% 0.54% 0.89% 0.37% 2.64%
1980-4 0.13% 0.12% 0.13% -0.29% -0.14% -0.05%
1984-4 -0.93% -0.45% 0.31% -0.91% 0.01% -1.97%
1988-4 0.14% 0.44% 0.14% -0.51% -0.05% 0.18%
Avg 0.00% 0.10% 0.33% -0.19% 0.04% 0.27%
 
1992-4 -0.09% -0.87% -1.92% -0.74% 0.92% -2.70%
1996-4 -0.42% -2.07% -0.51% -0.83% 0.69% -3.14%
2000-4 -2.76% 2.21% -1.39% 1.27% 0.39% -0.29%
2004-4 -0.62% 1.00% 1.35% -0.27% 0.49% 1.95%
2008-4 0.83% -0.69% -1.14% 1.33% -2.27% -1.94%
Avg -0.61% -0.08% -0.72% 0.15% 0.04% -1.22%
 
OTC summary for Presidential Year 4 1964 - 2008
Avg -0.30% -0.08% -0.14% -0.02% 0.03% -0.49%
Win% 33% 58% 64% 33% 58% 42%
 
OTC summary for all years 1963 - 2011
Avg -0.17% 0.08% 0.04% -0.03% -0.01% -0.09%
Win% 43% 57% 65% 46% 58% 51%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 1.26% 1.42% 0.13% -0.24% 0.13% 2.71%
1960-4 0.03% -0.14% -0.59% -0.12% -0.10% -0.92%
1964-4 0.46% 0.54% 0.51% -0.02% 0.12% 1.61%
1968-4 -0.99% -0.14% 0.00% 0.52% 0.15% -0.46%
 
1972-4 0.14% 0.50% 0.78% 0.05% -0.07% 1.40%
1976-4 1.02% -0.48% 0.54% 1.57% 0.14% 2.80%
1980-4 0.24% -0.05% 0.20% -1.38% -0.52% -1.51%
1984-4 -1.36% -0.57% -0.04% -1.14% -0.90% -4.02%
1988-4 0.06% 1.06% 0.05% -1.71% 0.34% -0.19%
Avg 0.02% 0.09% 0.31% -0.52% -0.20% -0.31%
 
1992-4 0.13% -0.48% -1.48% -0.32% 0.68% -1.48%
1996-4 -0.10% -0.47% -0.02% 0.02% 0.72% 0.15%
2000-4 -0.75% 1.62% 0.07% 0.55% -0.95% 0.54%
2004-4 -0.42% 0.36% 0.85% -0.30% -0.55% -0.04%
2008-4 0.01% -0.68% -0.97% 0.38% -1.85% -3.12%
Avg -0.23% 0.07% -0.31% 0.07% -0.39% -0.79%
 
SPX summary for Presidential Year 4 1956 - 2008
Avg -0.02% 0.18% 0.00% -0.15% -0.19% -0.18%
Win% 64% 43% 62% 43% 50% 43%
 
SPX summary for all years 1953 - 2011
Avg -0.06% 0.12% 0.02% -0.15% -0.02% -0.09%
Win% 58% 54% 48% 46% 58% 53%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth was flat again last week.

M2


Conclusion

The recent lows were unconfirmed by most of the breadth indicators, but new lows increased slightly on Thursday and Friday, hinting that what we saw last week was just a relief rally.

I expect the major averages to be lower on Friday June 15 than they were on Friday June 8.

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.

Gordon Harms produces a power point for our local timing group meetings. You can get a copy of that at: http://www.stockmarket-ta.com/

In his latest newsletter, Jerry Minton introduces the soon to be released "Alpha Seasonal Index". You can get his bi-weekly letter free by subscribing at the home page at www.alphaim.net.

Good Luck,

YTD W 7 /L10/T 6

 

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