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Technical Market Report for August 31, 2013

The good news is:
• There has been no significant increase in new lows on the NASDAQ.


The negatives

New highs have disappeared.

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 peaked last May, failed to confirm the SPX high in early August and has continued to fall.

NY NH peaked last May

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 took out its lows for this year.

OTC NH took out its lows for this year

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 has been unable to hold above the neutral line.

NY HL Ratio has been unable to hold above the neutral line


The positives

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 has managed to hold above the neutral line.

OTC HL ratio has managed to hold above the neutral line

NYSE new lows picked up a little last week, but remained well below their levels of 2 weeks ago. The chart below covers the past 6 months showing the SPX in red and a 10% trend of NYSE new lows (NY NL) in blue. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL continued moving sharply upward in spite of prices in general having a down week.

NY NL continued moving sharply upward

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

OTC NL also moved upward last week, but not as impressively as NY NL.

OTC NL also moved upward last week


Seasonality

Next week includes the first 4 trading days of September during the 1st year of the Presidential Cycle.

The tables below show the daily return on a percentage basis for the first 4 trading days September 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.

Returns for the coming week have been modestly positive over all years, but, modestly negative during the 1st year of the Presidential Cycle.

Report for the first 4 days of September.
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
  Day1 Day2 Day3 Day4 Totals
1965-1 0.22% 3 0.27% 4 0.74% 5 0.48% 2 1.72%
1969-1 0.32% 2 0.09% 3 -0.16% 4 -0.48% 5 -0.24%
 
1973-1 0.60% 2 0.50% 3 0.31% 4 0.62% 5 2.03%
1977-1 0.30% 4 0.43% 5 -0.05% 2 0.38% 3 1.06%
1981-1 -0.30% 2 0.11% 3 -1.74% 4 -1.23% 5 -3.15%
1985-1 -0.39% 2 -0.33% 3 -0.10% 4 0.31% 5 -0.51%
1989-1 0.43% 5 0.02% 2 -0.46% 3 0.09% 4 0.08%
Avg 0.13% 0.15% -0.41% 0.03% -0.10%
 
1993-1 0.45% 3 0.34% 4 0.14% 5 -1.38% 2 -0.46%
1997-1 1.94% 2 0.01% 3 0.40% 4 0.69% 5 3.03%
2001-1 -1.92% 2 -0.66% 3 -3.03% 4 -1.05% 5 -6.67%
2005-1 -0.19% 4 -0.32% 5 1.20% 2 0.24% 3 0.93%
2009-1 -2.00% 2 -0.09% 3 0.82% 4 1.79% 5 0.52%
Avg -0.35% -0.15% -0.09% 0.06% -0.53%
 
OTC summary for Presidential Year 1 1965 - 2009
Averages -0.05% 0.03% -0.16% 0.04% -0.14%
% Winners 58% 67% 50% 67% 58%
MDD 9/7/2001 6.52% -- 9/4/1981 3.13% -- 9/2/2009 2.09%
 
OTC summary for all years 1963 - 2012
Averages 0.06% 0.05% -0.01% 0.21% 0.32%
% Winners 59% 62% 60% 60% 56%
MDD 9/7/2001 6.52% -- 9/4/1974 5.48% -- 9/6/2000 5.22%
 
SPX Presidential Year 1
  Day1 Day2 Day3 Day4 Totals
1929-1 0.35% 2 -0.31% 3 -2.21% 4 2.61% 5 0.44%
 
1933-1 1.26% 5 -3.47% 2 0.09% 3 -1.38% 4 -3.50%
1937-1 -2.68% 3 -1.60% 4 0.65% 5 0.78% 6 -2.86%
1941-1 0.39% 2 -0.68% 3 -0.29% 4 -0.29% 5 -0.87%
1945-1 0.00% 2 0.13% 3 1.35% 4 -0.06% 5 1.42%
1949-1 0.59% 4 -0.13% 5 -0.07% 2 0.65% 3 1.05%
Avg -0.09% -1.15% 0.35% -0.06% -0.95%
 
1953-1 0.43% 2 0.60% 3 -0.21% 4 0.26% 5 1.07%
1957-1 0.49% 2 -0.86% 3 -0.51% 4 -0.31% 5 -1.19%
1961-1 0.18% 5 -0.34% 2 0.74% 3 -0.16% 4 0.41%
1965-1 0.00% 3 0.55% 4 0.47% 5 0.34% 2 1.36%
1969-1 0.03% 2 -0.59% 3 -0.82% 4 -0.59% 5 -1.97%
Avg 0.22% -0.13% -0.07% -0.09% -0.06%
 
1973-1 0.25% 2 0.12% 3 0.49% 4 -0.37% 5 0.49%
1977-1 0.06% 4 0.64% 5 0.27% 2 0.31% 3 1.28%
1981-1 0.19% 2 0.38% 3 -1.82% 4 -0.97% 5 -2.22%
1985-1 -0.38% 2 -0.29% 3 -0.05% 4 0.52% 5 -0.20%
1989-1 0.65% 5 -0.33% 2 -0.94% 3 -0.25% 4 -0.88%
Avg 0.15% 0.11% -0.41% -0.15% -0.31%
 
1993-1 -0.09% 3 -0.40% 4 0.01% 5 -0.61% 2 -1.09%
1997-1 3.13% 2 0.03% 3 0.33% 4 -0.20% 5 3.28%
2001-1 -0.06% 2 -0.11% 3 -2.24% 4 -1.86% 5 -4.27%
2005-1 0.10% 4 -0.29% 5 1.26% 2 0.24% 3 1.31%
2009-1 -2.21% 2 -0.33% 3 0.85% 4 1.31% 5 -0.38%
Avg 0.17% -0.22% 0.04% -0.22% -0.23%
 
SPX summary for Presidential Year 1 1929 - 2009
Averages 0.13% -0.35% -0.13% 0.00% -0.35%
% Winners 67% 33% 52% 43% 48%
MDD 9/7/1933 4.72% -- 9/2/1937 4.24% -- 9/7/2001 4.22%
 
SPX summary for all years 1928 - 2012
Averages -0.05% 0.11% 0.24% -0.06% 0.24%
% Winners 65% 54% 57% 45% 56%
MDD 9/4/1946 7.15% -- 9/4/1974 4.80% -- 9/7/1933 4.72%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth took a dive last week.

M2 Money Supply Chart


September

The charts for September are not the best because of the way the charts are calculated and the extreme activity around 911 which was in the 1st year of the Presidential Cycle.

Since 1963, over all years, the OTC in September has been up 60% of the time and as been on average flat for the month. During the 1st year of the Presidential Cycle September has been up 67% time with an average loss of -0.1% (helped considerably by a 17% loss in 2001). The best September ever for the OTC was 1998 (+13.0%), the worst 2001 (-17.0%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in September over all years since 1963 while the black line shows the average during the 4th year of the Presidential Cycle over the same period.

OTC in September over all years since 1963 Chart

Since 1928 the SPX has been up 45% of the time in September with an average loss of -1.1%. During the 1st year of the Presidential Cycle the SPX has been up 38% of the time with an average loss of -1.8%. The best September ever for the SPX was 1939 +16.5% the worst 1931 -29.9%.

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in September in red and the performance during the 4th year of the Presidential Cycle in black.

SPX in September Since 1928 Chart

Since 1979 the Russell 2000 (R2K) has been up 56% of the time in September with an average loss of -0.5%. During the 1st year of the Presidential Cycle the R2K has been up 63% of the time with an average loss of 1.6% (helped by a 13.6% loss in 2001). The best September ever for the R2K, 2010 +12.3%, the worst 2001 (-13.6%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in September in magenta and the performance during the 4th year of the Presidential Cycle in black.

R2K in September Since 1979 Chart

Since 1885 the DJIA has been up 44% of the time in September with an average loss of -1.0%. During the 1st year of the Presidential Cycle the DJIA has been up 50% of the time in September with an average loss of 1.2%. The best September ever for the DJIA, 1939 +13.5%, the worst 1930 -30.7%.

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in September in cyan and the performance during the 4th year of the Presidential Cycle in black.

DJIA in September Since 1885 Chart


Conclusion

Seasonality for the coming week is modestly negative and there is nothing in the breadth indicators suggesting strength.

I expect the major averages to be lower on Friday September 6 than they were on Friday August 30.

Last weeks positive forecast was a miss.

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 explains the Alpha Seasonal Index as published by Thomson Reuters. The letter is free and you can sign up at: http://alphaim.net/

Good Luck,

YTD W 19/L 9/T 7

 

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