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Technical Market Report for November 3, 2012

The good news is:
• Especially recently, Presidential elections have coincided with market turmoil and that should be over shortly.


The negatives

New lows have been creeping up.

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 lows (OTC NL) in red. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good). Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NL has fallen steadily for the past month.

OTC NL has fallen steadily for the past month

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

NY NL has also been falling for the past month and the rate of decent has been accelerating.

NY NL has also been falling for the past month

The next chart is similar to the one above except it covers the past year. If there is a positive to this chart, it is, unlike last March, when NY NL was leading the way down, for the current period NY NL has been following.


The positives

The trend has been negative, especially on the NASDAQ, but, new highs have held above new 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 / (new highs + new lows), OTC HL Ratio in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the neutral 50% level.

This one is dicey. OTC HL Ratio climbed above the neutral level late last week after falling below it for the first time in over 2 months. It is important that this level holds.

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

NY HL Ratio has held up better than OTC HL Ratio, but the trend has been down.


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday in November 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 2nd Friday of November 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 have been positive over all years, but negative for the 4th year of the Presidential Cycle, distorted by huge losses in 2000 and 2008.

Report for the week before the 2nd Friday of November.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.25% 0.25% -0.27% 0.16% 0.30% 0.68%
1968-4 -0.68% 0.00% -0.54% 0.06% -0.09% -1.25%
 
1972-4 0.18% 0.00% -0.39% -0.18% 0.23% -0.16%
1976-4 -0.82% -0.74% -0.30% 0.38% -0.06% -1.54%
1980-4 -0.21% 0.99% 1.42% 1.25% 0.75% 4.20%
1984-4 0.20% 0.86% -0.32% -0.10% 0.00% 0.64%
1988-4 -1.18% 0.62% -0.29% 0.17% -1.23% -1.91%
Avg -0.37% 0.43% 0.03% 0.30% -0.08% 0.25%
 
1992-4 0.85% 0.92% 1.14% -0.09% 0.44% 3.26%
1996-4 -0.11% 0.70% 1.37% 0.66% 0.27% 2.89%
2000-4 -1.03% -0.01% -5.39% -0.97% -5.36% -12.75%
2004-4 0.02% 0.20% -0.43% 1.31% 1.17% 2.27%
2008-4 -1.86% -2.22% -5.17% 6.50% -5.00% -7.74%
Avg -0.43% -0.08% -1.70% 1.48% -1.70% -2.41%
 
OTC summary for Presidential Year 4 1964 - 2008
Avg -0.37% 0.16% -0.76% 0.76% -0.78% -0.95%
Win% 42% 70% 25% 67% 55% 50%
 
OTC summary for all years 1963 - 2011
Avg -0.01% 0.14% -0.17% 0.26% -0.11% 0.08%
Win% 47% 59% 55% 59% 58% 51%
 
SPX Presidential Year Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 1.32% 0.00% -1.03% -0.81% -0.83% -1.35%
1960-4 0.38% 0.00% 0.44% 1.41% -0.46% 1.76%
1964-4 -0.05% -0.41% 0.28% 0.13% 0.02% -0.02%
1968-4 0.04% 0.00% 0.16% 0.22% 0.43% 0.86%
 
1972-4 -0.21% 0.00% -0.55% 0.13% 0.20% -0.43%
1976-4 -1.21% -0.28% -0.51% 0.84% -0.40% -1.57%
1980-4 0.23% 1.37% 2.54% 1.41% 0.48% 6.04%
1984-4 0.69% 1.09% -0.73% -0.29% -0.64% 0.12%
1988-4 -0.86% 0.45% -0.66% 0.13% -2.11% -3.05%
Avg -0.27% 0.66% 0.02% 0.45% -0.49% 0.22%
 
1992-4 0.24% 0.01% 0.86% 0.16% -0.10% 1.16%
1996-4 0.42% 1.05% 1.46% 0.42% 0.44% 3.79%
2000-4 0.39% -0.02% -1.58% -0.65% -2.44% -4.30%
2004-4 -0.11% -0.07% -0.10% 0.91% 0.91% 1.54%
2008-4 -1.24% -2.20% -5.19% 6.92% -4.17% -5.88%
Avg -0.06% -0.25% -0.91% 1.55% -1.07% -0.74%
 
SPX summary for Presidential Year 4 1956 - 2008
Avg 0.00% 0.10% -0.33% 0.78% -0.62% -0.09%
Win% 57% 50% 43% 79% 43% 50%
 
SPX summary for all years 1953 - 2011
Avg -0.02% 0.09% -0.07% 0.27% -0.05% 0.21%
Win% 51% 50% 59% 59% 57% 56%


Conclusion

The seasonal strength expected last week did not materialize which makes me uncomfortable about next week.

I expect the major averages to be lower on Friday November 9 than they were on Friday November 2.

Last week the Dow Jones industrial Average and OTC were down a little while the SPX, S&P mid cap and Russell 2000 were up a little so I am calling last weeks positive forecast a tie.

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 Alpha's seasonal strategies and the upcoming switch to equities. You can read it and sign up for his free newsletter at Alpha's homepage: http://alphaim.net/

Good Luck,

YTD W 14 /L 16/T 14

 

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