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Technical Market Report for September 7, 2013

The good news is:
• New highs picked up to the highest levels in several weeks.


The negatives

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 and failed to confirm the SPX high in early August, but, may have begun turning upward last week. If this is any more than a bear market rally NY NH will have to turn sharply upward.

SPX versus NY NH 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.

The OTC is less than 1% off its early August high while OTC NH is only slightly off its low for the year. If the OTC hits a new high in the next few days OTC NH will not be confirming the high.

OTC versus OTC NH Chart


The positives

There have been no new lows to speak of on the NASDAQ for quite a while and new lows declined on the NYSE 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 divided by (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 80% on Friday. There are trading systems that impose a NO SELL filter when variations of this indicator are above 80%.

OTC versus OTC HL ratio

The next chart is similar to the one above except it shows the SPX in red and NY HL Ratio has been calculated from NYSE data.

NY HL Ratio has been weaker than OTC HL Ratio, but it did manage to go positive last week.

SPX versus NYSE H/L Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of September 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 2nd Friday of September during the 1st year of the Presidential Cycle.

OTC data covers the period from 1963 - 2012 while SPX data runs 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 for the coming week have been negative by all measures. Those returns are heavily influenced by 9-11-2001.

Report for the week before the 2nd Friday of September.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.00% 0.48% 0.62% 0.35% 0.61% 2.06%
1969-1 -0.32% -0.90% 0.09% 1.13% 0.54% 0.54%
 
1973-1 -0.72% -0.45% -0.42% 0.26% 0.45% -0.89%
1977-1 0.00% -0.05% 0.38% 0.12% -0.37% 0.08%
1981-1 0.00% -2.55% -0.01% 1.50% 1.21% 0.15%
1985-1 -0.04% -0.53% -1.04% -0.51% -0.94% -3.07%
1989-1 0.00% 0.02% -0.46% 0.09% 0.35% 0.00%
Avg -0.38% -0.71% -0.31% 0.29% 0.14% -0.75%
 
1993-1 0.00% -1.38% -1.17% 0.96% 0.89% -0.70%
1997-1 0.59% 0.66% -1.02% 0.04% 0.57% 0.83%
2001-1 -6.83% -1.55% -1.75% -3.72% -3.25% -17.10%
2005-1 0.00% 1.20% 0.24% -0.28% 0.44% 1.60%
2009-1 0.00% 0.94% 1.11% 1.15% -0.15% 3.05%
Avg -3.12% -0.03% -0.52% -0.37% -0.30% -2.46%
 
OTC summary for Presidential Year 1 1965 - 2009
Avg -1.47% -0.34% -0.29% 0.09% 0.03% -1.12%
Win% 20% 42% 42% 75% 67% 58%
 
OTC summary for all years 1963 - 2012
Avg -0.42% -0.03% -0.11% 0.08% 0.10% -0.13%
Win% 43% 50% 55% 64% 60% 60%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 0.00% 0.17% 0.17% -1.01% -1.15% -1.83%
1957-1 -0.90% -0.93% 0.89% 1.27% -0.04% 0.29%
1961-1 0.00% -0.34% 0.74% -0.16% -0.69% -0.45%
1965-1 0.00% 0.34% 0.34% 0.26% 0.26% 1.20%
1969-1 -1.00% 0.73% 1.68% -0.77% 0.14% 0.78%
Avg -0.95% 0.00% 0.76% -0.08% -0.30% 0.00%
 
1973-1 -0.87% -0.61% -0.16% 0.29% 1.04% -0.29%
1977-1 0.00% 0.27% 0.31% -0.74% -0.94% -1.11%
1981-1 0.00% -1.74% 0.36% 1.47% 1.22% 1.31%
1985-1 0.01% -0.72% -1.00% -0.72% -0.42% -2.86%
1989-1 0.00% -0.33% -0.94% -0.25% 0.12% -1.41%
Avg -0.43% -0.63% -0.29% 0.01% 0.21% -0.87%
 
1993-1 0.00% -0.61% -0.41% 0.19% 0.92% 0.09%
1997-1 0.23% 0.26% -1.56% -0.70% 1.24% -0.53%
2001-1 -4.92% -0.58% -1.61% -3.11% -1.90% -12.12%
2005-1 0.00% 1.26% 0.24% -0.38% 0.80% 1.92%
2009-1 0.00% 0.88% 0.78% 1.04% -0.14% 2.57%
Avg -2.34% 0.24% -0.51% -0.59% 0.18% -1.62%
 
SPX summary for Presidential Year 1 1953 - 2009
Avg -1.24% -0.13% -0.01% -0.22% 0.03% -0.83%
Win% 33% 47% 60% 40% 53% 47%
 
SPX summary for all years 1953 - 2012
Avg -0.31% -0.04% -0.05% -0.16% 0.07% -0.31%
Win% 44% 52% 56% 48% 63% 52%


Money Supply (M2)

The money supply chart was provided by Gordon Harms. Money supply growth aligned with the elevated trend last week.

M2 Money Supply Chart


Conclusion

The market was up for 4 consecutive days last week so it is a little overbought. Take 9-11 out of the equation and seasonality is neutral.

I expect the major averages to be lower on Friday September 13 than they were on Friday September 6.

Last weeks negative 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 10/T 7

 

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