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Technical Market Report for November 17, 2012

The good news is:
• The market is oversold going into a seasonally strong period.


The negatives

There has been no sign of a bottom from the breadth indicators.

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

OTC NL is at its lows point in nearly a year and falling.

The value of OTC NL is 103 so it will require less than 103 new lows to turn OTC NL upward.

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.

The patterns are similar. The value of NY NL is 99 so we are looking for NYSE new low numbers less than 99.

The next chart is similar to the one above except it covers 1 year.

NY NL is at its lowest point in over a year.


The positives

The positives are hard to find in the breadth indicators, but, the seasonal pattern calls for a bottom right about now.

Many of the breadth indicators are at their lowest point in nearly 2 years, the market is oversold and due for, at least, a bounce.

The chart below covers the past 6 months showing an average of the components of the Dow Jones semiconductor index in red and a new low indicator calculated from components of that index in blue. New lows, for this chart have been calculated on a closing basis over the previous 21 trading days (very short term).

Semiconductors have been hard hit and, although the index closed at a lower low last Friday the new low indicator is quite a bit higher than it was at its previous low about a month ago, a non-confirmation.


Seasonality

Next week includes 3 trading days prior and one trading day after Thanksgiving during the 4th year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for 3 trading days prior and one trading day after Thanksgiving 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 by all measures.

Report for 3 days before Thanksgiving and 1 day after. Day1 = the day after
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
  Day4 Day3 Day2 Day1 Totals
1964-4 -0.16% 1 -0.40% 2 -0.18% 3 -0.16% 5 -0.90%
1968-4 0.47% 1 0.20% 2 1.52% 3 0.68% 5 2.86%
 
1972-4 -0.16% 1 0.05% 2 0.23% 3 0.40% 5 0.52%
1976-4 0.56% 1 -0.28% 2 0.52% 3 0.80% 5 1.61%
1980-4 -0.90% 1 0.58% 2 0.80% 3 0.53% 5 1.01%
1984-4 -0.91% 1 0.07% 2 -0.01% 3 1.00% 5 0.14%
1988-4 -0.68% 1 0.08% 2 0.66% 3 -0.38% 5 -0.32%
Avg -0.42% 0.10% 0.44% 0.47% 0.59%
 
1992-4 -0.59% 1 1.11% 2 0.37% 3 0.18% 5 1.08%
1996-4 0.47% 1 0.06% 2 0.48% 3 0.41% 5 1.42%
2000-4 -5.01% 1 -0.14% 2 -4.05% 3 5.41% 5 -3.79%
2004-4 0.70% 1 -0.04% 2 0.88% 3 -0.03% 5 1.51%
2008-4 6.33% 1 -0.50% 2 4.60% 3 0.23% 5 10.66%
Avg 0.38% 0.10% 0.46% 1.24% 2.18%
 
OTC summary for Presidential Year 4 1964 - 2008
Averages 0.01% 0.07% 0.48% 0.76% 1.32%
% Winners 42% 58% 75% 75% 75%
MDD 11/22/2000 8.98% -- 11/19/1984 .91% -- 11/24/1980 .90%
 
OTC summary for all years 1963 - 2011
Averages -0.11% -0.21% 0.34% 0.46% 0.49%
% Winners 47% 50% 76% 80% 63%
 
SPX Presidential Year 4
  Day4 Day3 Day2 Day1 Totals
1952-4 0.59% 1 -0.24% 2 0.63% 3 0.55% 5 1.54%
1956-4 -0.98% 1 -0.88% 2 -0.49% 3 1.05% 5 -1.30%
1960-4 0.20% 1 -0.38% 2 0.14% 3 0.59% 5 0.56%
1964-4 -0.32% 1 -0.31% 2 -0.34% 3 -0.33% 5 -1.30%
1968-4 0.17% 1 0.73% 2 0.47% 3 0.57% 5 1.93%
Avg -0.07% -0.22% 0.08% 0.49% 0.28%
 
1972-4 0.03% 1 0.59% 2 0.59% 3 0.32% 5 1.53%
1976-4 0.66% 1 -0.61% 2 0.44% 3 0.72% 5 1.21%
1980-4 -0.58% 1 0.74% 2 0.60% 3 0.25% 5 1.01%
1984-4 -0.61% 1 0.66% 2 0.21% 3 1.46% 5 1.72%
1988-4 -0.09% 1 0.37% 2 0.67% 3 -0.66% 5 0.29%
Avg -0.12% 0.35% 0.50% 0.42% 1.15%
 
1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.82%
1996-4 1.11% 1 -0.14% 2 -0.12% 3 0.27% 5 1.11%
2000-4 -1.84% 1 0.35% 2 -1.85% 3 1.47% 5 -1.87%
2004-4 0.59% 1 -0.03% 2 0.41% 3 0.08% 5 1.05%
2008-4 6.47% 1 0.66% 2 3.53% 3 0.96% 5 11.62%
Avg 1.20% 0.28% 0.47% 0.60% 2.55%
 
SPX summary for Presidential Year 4 1952 - 2008
Averages 0.34% 0.14% 0.35% 0.50% 1.33%
% Winners 53% 53% 73% 87% 80%
MDD 11/22/2000 3.32% -- 11/21/1956 2.34% -- 11/27/1964 1.30%
 
SPX summary for all years 1952 - 2011
Averages -0.15% 0.09% 0.36% 0.36% 0.66%
% Winners 43% 58% 78% 75% 67%


Conclusion

The market has been following the seasonal pattern quite closely and that pattern calls for a bottom right about now. The market is as over sold as it has been at any time in the past year so the rally could be significant.

I expect the major averages to be higher on Friday November 23 than they were on Friday November 16.

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 16 /L 16/T 14

 

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