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Investors are scrambling to diversify…

Technical Market Report

The good news is:
 • There are hints of a bottom which should lead to a tradablerally.

Although new lows remain at threateningly high levels and the new low indicators have not turned decisively upward, the price lows of last Wednesday brought substantially fewer new lows on both the NYSE and NASDAQ than we had on the previous Friday's (April 15th) higher low.

I have been showing the chart below for the past several weeks. It shows the NASDAQ composite (OTC) in red and a 10% trend (19 day EMA) of NASDAQ new lows in blue. The new low indicator (NL) has been plotted on an inverted Y axis so when new lows are decreasing the indicator moves upward and when new lows are increasing the indicator moves downward. The chart begins July 23, 2004 and dashed vertical lines indicate the 1st trading day of each month. When a bottom has been reached new lows diminish rapidly causing the indicator to move sharply upward like it did last August. Very short term the indicator can give false signals so it is prudent to wait for 5 consecutive trading days of upward movement before assuming a bottom is in. For the past week the indicator has been flat.

A similar chart using NYSE data had a slightly negative bias last week.
The S&P 500 (SPX) is shown in red and NL calculated from NYSE data is shown in brown.

The secondaries lead both up and down. The chart below shows the Russell 2000 (R2K) in red, the S&P 500 (SPX) in green and a FastTrack relative strength indicator called Accutrack as a histogram in yellow.

Accutrack moved upward last week indicating performance of the R2K relative to the SPX improved.

Defining next week as the last 5 trading days in April, the tables below show the daily performance of the NASDAQ composite (OTC) and SPX during the first year of the presidential cycle. The last 5 trading days in May during the 1st year of the presidential cycle have been up about 70% of the time.

Last 5 days of April
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.
MDD = Maximum Draw Down
AVG = Average (mean) of previous 5 periods.
Averages = Average (mean) of all qualifying periods.

Presidential year 1 (1965 – 2001)
OTC Day5 Day4 Day3 Day2 Day1 Totals
1965-1 0.35% 1 0.33% 2 0.37% 3 0.56% 4 -0.31% 5 1.31%
1969-1 0.50% 4 -0.19% 5 0.68% 1 1.06% 2 1.81% 3 3.86%
1973-1 -1.58% 2 -1.67% 3 0.32% 4 -1.20% 5 -0.51% 1 -4.65%
1977-1 -0.90% 1 -0.15% 2 0.71% 3 0.28% 4 0.44% 5 0.39%
1981-1 0.71% 5 0.15% 1 -1.02% 2 -0.65% 3 0.24% 4 -0.58%
Avg (5 Prd) -0.19% -0.31% 0.21% 0.01% 0.34% 0.07%
 
1985-1 0.44% 3 0.32% 4 0.06% 5 -0.71% 1 -0.55% 2 -0.44%
1989-1 -0.14% 1 -0.11% 2 0.16% 3 0.66% 4 0.32% 5 0.89%
1993-1 -1.90% 1 1.03% 2 0.86% 3 0.04% 4 0.45% 5 0.48%
1997-1 0.08% 4 -1.53% 5 0.64% 1 2.10% 2 1.46% 3 2.76%
2001-1 -2.07% 2 2.14% 3 -1.21% 4 2.01% 5 1.95% 1 2.82%
Avg (5 Prd) -0.72% 0.37% 0.10% 0.82% 0.73% 1.30%
 
Summary of presidential year 1 1965 - 2001 (OTC)
Averages -0.45% 0.03% 0.16% 0.42% 0.53% 0.68%
% Winners 50% 50% 80% 70% 70% 70%
MDD 4/30/1973 4.57% -- 4/24/2001 2.07% -- 4/26/1993 1.90%
 
Summary of all years 1963 - 2004 (OTC)
Averages -0.25% -0.08% -0.04% 0.14% 0.36% 0.14%
% Winners 52% 50% 69% 62% 71% 60%
MDD 4/29/1970 7.72% -- 4/30/2004 6.32% -- 4/29/1999 4.66%
 
SPX Presidential year 1
SPX Day5 Day4 Day3 Day2 Day1 Totals
1929-1 -0.47% 4 -0.20% 5 0.27% 6 -0.47% 1 1.61% 2 0.75%
1933-1 -2.40% 2 0.65% 3 -0.90% 4 1.69% 5 2.00% 6 1.03%
1937-1 -3.46% 1 1.67% 2 -2.68% 3 0.00% 4 2.75% 5 -1.72%
1941-1 -0.74% 5 -0.11% 6 0.32% 1 0.21% 2 -1.38% 3 -1.69%
 
1945-1 -0.20% 3 -0.20% 4 0.41% 5 0.61% 6 0.34% 1 0.95%
1949-1 0.54% 2 0.00% 3 -0.47% 4 0.14% 5 0.20% 6 0.41%
1953-1 0.04% 5 0.58% 1 0.74% 2 0.65% 3 -0.24% 4 1.77%
1957-1 0.15% 3 -0.35% 4 -0.13% 5 0.51% 1 0.02% 2 0.20%
1961-1 -2.08% 1 1.40% 2 0.38% 3 -0.14% 4 -0.23% 5 -0.67%
Avg (5 Prd) -0.31% 0.28% 0.19% 0.35% 0.02% 0.53%
 
1965-1 0.01% 1 0.17% 2 -0.04% 3 -0.08% 4 0.20% 5 0.26%
1969-1 0.47% 4 0.44% 5 0.30% 1 0.74% 2 0.88% 3 2.84%
1973-1 -1.42% 2 -1.50% 3 0.51% 4 -1.52% 5 -0.24% 1 -4.18%
1977-1 -1.31% 1 -0.04% 2 0.88% 3 0.24% 4 0.24% 5 0.01%
1981-1 0.90% 5 0.25% 1 -0.85% 2 -0.95% 3 -0.18% 4 -0.83%
Avg (5 prd) -0.27% -0.14% 0.16% -0.31% 0.18% -0.38%
 
1985-1 0.21% 3 0.64% 4 -0.68% 5 -0.85% 1 -0.44% 2 -1.12%
1989-1 -0.30% 1 -0.63% 2 0.06% 3 0.86% 4 0.02% 5 0.02%
1993-1 -0.80% 1 1.03% 2 0.00% 3 0.20% 4 0.30% 5 0.73%
1997-1 -0.32% 4 -0.75% 5 0.99% 1 2.73% 2 0.92% 3 3.57%
2001-1 -1.22% 2 1.59% 3 0.47% 4 1.50% 5 -0.29% 1 2.06%
Avg (5prd) -0.48% 0.38% 0.17% 0.89% 0.10% 1.05%
 
Summary of presidential year 1 1929 - 2001 (SPX)
Averages -0.65% 0.24% -0.02% 0.32% 0.34% 0.23%
% Winners 37% 53% 63% 63% 63% 68%
MDD 4/28/1937 4.48% -- 4/30/1973 4.12% -- 4/27/1933 2.65%
 
SPX summary of all years 1928 - 2004
Averages -0.26% 0.08% -0.14% -0.06% 0.22% -0.17%
% Winners 47% 59% 50% 49% 61% 55%
MDD 4/29/1932 7.02% -- 4/29/1936 6.82% -- 4/29/1931 6.02%

Prices moved upward last week, the secondaries outperformed the blue chips and new lows diminished somewhat. But the decrease in new lows was not enough to turn the new low indicators decisively upward. Seasonal strength should take prices higher next week.

I expect the major indices to be higher on Friday April 29 than they were on Friday April 22.

Last weeks negative forecast based on the rapid build up of new lows looked good as of Wednesday's close, but the big rally on Thursday wiped out all of the weeks losses and then some.

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