The good news is:
• Many of the major indices closed at all time highs on Thursday.
The negatives
New highs continued to deteriorate last week
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 failed to confirm the multi year high in the OTC.
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated from NYSE data.
NY NH failed to confirm the multi year high in the SPX.
The next chart from FastTrack (fasttrack.net) covers the past 2 years showing SPX in green and the Russell 2000 in red. A relative strength indicator called Accutrack is shown as a histogram in yellow.
The secondary's represented by the Russell 2000 lead both up and down.
You can see in Accutrack positive leadership by the secondary's has been deteriorating since the 1st of the year and recently went negative.
The positives
New lows remained insignificant 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 / (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.
OTC HL Ratio recovered to above 80%. There are trading systems that impose a no sell filter when variations of this indicator are above 80%.
The chart below is similar to the one above except it shows SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.
NY HL Ratio recovered to above 90%.
Seasonality
Next week includes the 5 trading days prior to the 3rd Friday of April during the 1st 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 April during the 1st year of the Presidential Cycle.
OTC data covers the period from 1963 - 2012 and SPX data covers the period from 1953 - 2012. There are summaries for both the 1st 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 over all years have been positive, but, average returns for the 1st year of the Presidential Cycle have been negative.
Report for the week before the 3rd Friday of April,
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.
| OTC Presidential Year 1 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1965-1 | 0.30% | 0.16% | 0.12% | -0.06% | 0.28% | 0.79% |
| 1969-1 | 0.55% | -0.89% | 0.08% | 0.50% | -0.19% | 0.06% |
| 1973-1 | -0.99% | -1.58% | -1.67% | 0.32% | -1.20% | -5.13% |
| 1977-1 | -0.09% | -0.07% | 0.27% | -0.56% | -0.73% | -1.19% |
| 1981-1 | 0.42% | -0.38% | 0.35% | 0.24% | 0.71% | 1.34% |
| 1985-1 | -0.35% | 0.00% | 0.44% | 0.32% | 0.06% | 0.47% |
| 1989-1 | 0.02% | 0.71% | 0.28% | -0.09% | 0.53% | 1.45% |
| Avg | -0.20% | -0.33% | -0.06% | 0.05% | -0.13% | -0.61% |
| 1993-1 | -0.56% | -0.16% | 0.31% | -0.08% | -0.77% | -1.26% |
| 1997-1 | 0.79% | -0.29% | -0.21% | 0.56% | 0.45% | 1.30% |
| 2001-1 | -4.81% | -2.07% | 2.14% | -1.21% | 2.01% | -3.95% |
| 2005-1 | -0.36% | 0.67% | -1.55% | -1.40% | -1.98% | -4.62% |
| 2009-1 | -3.88% | 2.22% | 0.14% | 0.37% | 2.55% | 1.39% |
| Avg | -1.77% | 0.07% | 0.17% | -0.35% | 0.45% | -1.43% |
| OTC summary for Presidential Year 1 1965 - 2009 | ||||||
| Avg | -0.75% | -0.15% | 0.06% | -0.09% | 0.14% | -0.78% |
| Win% | 42% | 36% | 75% | 50% | 58% | 58% |
| OTC summary for all years 1963 - 2012 | ||||||
| Avg | -0.40% | 0.27% | 0.31% | 0.28% | 0.16% | 0.62% |
| Win% | 45% | 55% | 72% | 64% | 64% | 70% |
| SPX Presidential Year 1 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1953-1 | 0.45% | -0.24% | -0.85% | -1.10% | 0.04% | -1.71% |
| 1957-1 | 0.15% | 0.37% | 0.15% | -0.35% | -0.13% | 0.20% |
| 1961-1 | 0.47% | -0.72% | -0.59% | 0.02% | -0.08% | -0.90% |
| 1965-1 | 0.41% | -0.06% | -0.18% | 0.54% | 0.11% | 0.83% |
| 1969-1 | -0.67% | 0.22% | 0.02% | 0.47% | 0.44% | 0.48% |
| Avg | 0.16% | -0.09% | -0.29% | -0.09% | 0.08% | -0.22% |
| 1973-1 | -0.53% | -1.42% | -1.50% | 0.51% | -1.52% | -4.47% |
| 1977-1 | -0.49% | -0.47% | 0.33% | -0.65% | -1.31% | -2.59% |
| 1981-1 | 0.56% | -0.90% | -0.07% | -0.15% | 0.90% | 0.34% |
| 1985-1 | -0.23% | 0.65% | 0.21% | 0.64% | -0.68% | 0.60% |
| 1989-1 | 0.12% | 1.43% | 0.37% | -0.31% | 1.12% | 2.72% |
| Avg | -0.12% | -0.14% | -0.13% | 0.01% | -0.30% | -0.68% |
| 1993-1 | -0.33% | -0.53% | -0.33% | -0.94% | -0.55% | -2.68% |
| 1997-1 | 0.82% | 1.48% | 1.17% | -0.23% | 0.60% | 3.84% |
| 2001-1 | -1.50% | -1.22% | 1.59% | 0.47% | 1.50% | 0.85% |
| 2005-1 | 0.00% | 0.55% | -1.18% | -1.00% | -1.67% | -3.29% |
| 2009-1 | -4.28% | 2.13% | -0.77% | 0.99% | 1.68% | -0.25% |
| Avg | -1.06% | 0.48% | 0.10% | -0.14% | 0.31% | -0.31% |
| SPX summary for Presidential Year 1 1953 - 2009 | ||||||
| Avg | -0.34% | 0.09% | -0.11% | -0.07% | 0.03% | -0.40% |
| Win% | 53% | 47% | 47% | 47% | 53% | 53% |
| SPX summary for all years 1953 - 2012 | ||||||
| Avg | -0.14% | 0.28% | 0.10% | 0.13% | -0.03% | 0.34% |
| Win% | 47% | 53% | 59% | 63% | 50% | 67% |
Money supply (M2)
The money supply chart was provided by Gordon Harms. Money supply growth recovered last week.
Conclusion
The market has been deteriorating technically since the 1st of the year, but, the number of new lows is still insignificant.
I expect the major averages to be higher on Friday April 19 than they were on Friday April 12.
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In his latest newsletter, Jerry Minton points out that we are entering the "dead zone" for stocks, a six month period over which average returns have been minimal for the past 60 years. You can sign up at: http://www.alphaim.net/
Good Luck,
YTD W 7/L 4/T 4
