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Technical Market Report for August 24, 2013

The good news is:
• New lows disappeared on the NYSE last week.


The negatives

There have been no new highs to speak of.

The chart below covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH is close to its low of last June and falling.

NY Bew Highs Chart

The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NH, in green, has been calculated from NASDAQ data.

OTC NH continued its tumble last week.

OTC New Highs Chart


The positives

New lows on the NYSE declined from 479 on Monday to 35 on Friday.

The chart below covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs / (new highs + new lows), (NY 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.

NY HL Ratio moved sharply upward last week.

NY HL Ratio Chart

The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated from NASDAQ data.

OTC HL ratio also turned sharply upward last week, but it never did go negative during the recent period of weakness.

OTC HL Ratio Chart


Seasonality

Next week includes the last 5 trading days of August during the 1st year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the last 5 trading days August during the 1st year of the Presidential Cycle.

OTC data covers the period from 1963 - 2012 while SPX data runs from 1928 - 2012. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

The coming week has been up over half of the time while average returns have been modestly negative.

Report for the last 5 days of August.
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 1
  Day5 Day4 Day3 Day2 Day1 Totals
1965-1 0.02% 3 0.36% 4 0.20% 5 0.26% 1 0.20% 2 1.03%
1969-1 0.80% 1 -0.24% 2 -0.59% 3 0.06% 4 0.97% 5 0.99%
 
1973-1 0.50% 1 0.08% 2 0.78% 3 0.19% 4 0.85% 5 2.39%
1977-1 -0.61% 4 -0.25% 5 0.48% 1 -0.26% 2 -0.01% 3 -0.64%
1981-1 -1.48% 2 0.02% 3 -0.50% 4 0.37% 5 -0.91% 1 -2.51%
1985-1 -0.13% 1 -0.10% 2 0.34% 3 0.11% 4 0.13% 5 0.35%
1989-1 0.19% 5 0.09% 1 -0.13% 2 0.36% 3 0.23% 4 0.74%
Avg -0.31% -0.03% 0.19% 0.16% 0.06% 0.06%
 
1993-1 -0.20% 3 -0.31% 4 0.37% 5 0.45% 1 0.74% 2 1.05%
1997-1 0.18% 1 -0.64% 2 0.26% 3 -0.89% 4 0.38% 5 -0.71%
2001-1 -0.23% 1 -2.00% 2 -1.17% 3 -2.00% 4 0.77% 5 -4.63%
2005-1 0.26% 4 -0.64% 5 0.80% 1 -0.37% 2 1.05% 3 1.09%
2009-1 0.31% 2 0.01% 3 0.16% 4 0.05% 5 -0.97% 1 -0.44%
Avg 0.06% -0.72% 0.08% -0.55% 0.39% -0.73%
 
OTC summary for Presidential Year 1 1965 - 2009
Averages -0.03% -0.30% 0.08% -0.14% 0.28% -0.11%
% Winners 58% 42% 67% 67% 75% 58%
MDD 8/30/2001 5.30% -- 8/31/1981 2.50% -- 8/28/1997 1.27%
 
OTC summary for all years 1963 - 2012
Averages 0.12% -0.12% 0.10% -0.11% 0.26% 0.24%
% Winners 58% 52% 62% 62% 73% 58%
MDD 8/31/1998 7.45% -- 8/30/2001 5.30% -- 8/30/1966 5.07%
 
SPX Presidential Year 1
  Day5 Day4 Day3 Day2 Day1 Totals
1929-1 -0.26% 1 -0.06% 2 -0.19% 3 0.97% 4 1.34% 5 1.80%
 
1933-1 2.00% 5 -0.18% 1 -0.53% 2 -0.89% 3 -0.09% 4 0.31%
1937-1 -1.94% 4 -1.67% 5 0.19% 6 1.32% 1 -0.50% 2 -2.60%
1941-1 0.79% 2 0.10% 3 0.29% 4 -0.10% 5 0.19% 6 1.27%
1945-1 1.46% 1 0.33% 2 -0.13% 3 0.33% 4 1.04% 5 3.03%
1949-1 0.26% 4 0.39% 5 -1.05% 1 0.60% 2 0.07% 3 0.27%
Avg 0.51% -0.21% -0.25% 0.25% 0.14% 0.46%
 
1953-1 -0.66% 2 -0.29% 3 -0.29% 4 -0.21% 5 -1.77% 1 -3.23%
1957-1 -1.39% 1 1.64% 2 0.07% 3 -0.40% 4 1.71% 5 1.62%
1961-1 0.12% 5 0.04% 1 -0.22% 2 0.38% 3 0.38% 4 0.71%
1965-1 0.12% 3 0.38% 4 0.07% 5 0.01% 1 -0.05% 2 0.53%
1969-1 -1.03% 1 -0.66% 2 0.20% 3 0.42% 4 0.65% 5 -0.42%
Avg -0.57% 0.22% -0.04% 0.04% 0.19% -0.16%
 
1973-1 0.79% 1 0.59% 2 0.98% 3 -0.14% 4 0.36% 5 2.57%
1977-1 -1.11% 4 -0.09% 5 0.90% 1 -0.56% 2 0.40% 3 -0.46%
1981-1 -0.29% 2 -0.14% 3 -1.16% 4 0.46% 5 -1.04% 1 -2.17%
1985-1 0.07% 1 0.42% 2 0.39% 3 0.05% 4 -0.16% 5 0.78%
1989-1 -0.28% 5 0.45% 1 -0.64% 2 0.23% 3 0.23% 4 -0.02%
Avg -0.17% 0.25% 0.09% 0.01% -0.04% 0.14%
 
1993-1 0.08% 3 0.20% 4 -0.11% 5 0.30% 1 0.36% 2 0.82%
1997-1 -0.37% 1 -0.78% 2 0.07% 3 -1.10% 4 -0.46% 5 -2.63%
2001-1 -0.48% 1 -1.50% 2 -1.11% 3 -1.70% 4 0.40% 5 -4.40%
2005-1 0.23% 4 -0.60% 5 0.60% 1 -0.32% 2 0.99% 3 0.89%
2009-1 0.24% 2 0.01% 3 0.28% 4 -0.20% 5 -0.81% 1 -0.48%
Avg -0.06% -0.53% -0.05% -0.61% 0.10% -1.16
 
SPX summary for Presidential Year 1 1929 - 2009
Averages -0.08% -0.07% -0.07% -0.03% 0.16% -0.09%
% Winners 52% 52% 52% 52% 62% 57%
MDD 8/30/2001 4.72% -- 8/27/1937 3.58% -- 8/31/1953 3.20%
 
SPX summary for all years 1928 - 2012
Averages -0.10% -0.08% 0.03% -0.09% 0.18% -0.06%
% Winners 43% 46% 62% 49% 63% 54%
MDD 8/31/1998 6.13% -- 8/29/1966 5.19% -- 8/30/2001 4.72%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth remained above its elevated trend of the last few years.

M2 Money Supply versus S&P500 Chart


Conclusion

The market is coming off a short term bottom so risk should be minimal for a little while.

I expect the major averages to be higher on Friday August 30 than they were on Friday August 23.

Last week the Dow Jones Industrial Average was down while all the other major averages were up 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://www.alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

In his latest newsletter, Jerry Minton makes the case for why stock market risk should be higher over the next several years. The letter is free and you can subscribe at: http://www.alphaim.net/

Good Luck,

YTD W 19/L 8/T 7

 

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