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Technical Market Report

The good news is:
•  All of the broad based breadth indicators are still moving sharplyupward.

As of Tuesday's close the NASDAQ composite (OTC) had been up for 8 consecutive days. The last time that happened was in December of 1999.

Summation indices (SI) are running totals of oscillator values. When the oscillator is positive the SI rises when the oscillator is negative, the SI falls. The chart below shows the NASDAQ composite (OTC) and NASDAQ SI's calculated from advancing issues - declining issues, new highs - new lows and upside volume - downside volume. The SI's offer a good indicator of the trend and all of the NASDAQ SI's are heading sharply upward.

The NASDAQ new high indicator (NH) is a 10% trend (19 day EMA) of NASDAQ new highs. This indicator does a good job of indicating the short term direction of the market. It is heading modestly upward; Tuesday's price decline also brought a decline in NH which makes me a little nervous.

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 went slightly positive last week, but the rate of ascent appears to be attenuating.

Norman Fosbeck did a study that found an outsized part of the market's have been made in the first and last several trading days of the month. In another study Yale Hirsch found that virtually all of the markets gains have been made between November 1 and May 1. Given the results of those studies, it is not surprising to find that, although positive, the gains realized from the last trading day of May and the first three trading days of June have been modest.

The tables below show the performance of the OTC and SPX from the last day of May through the first three trading days of June during the 1st year of the presidential cycle.

OTC data covers the first year of the presidential cycle from 1965 with a summary for all years from 1963.

SPX data covers the first year of the presidential cycle from 1929 with a summary for all years from 1928.

Last trading day of May and the first 3 trading days of June.
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 Day1 Day2 Day3 Totals
1965-1 -0.36% 5 0.40% 2 -1.17% 3 -0.50% 4 -1.64%
1969-1 -0.27% 4 0.28% 1 -0.49% 2 -0.15% 3 -0.63%
1973-1 -0.53% 4 -0.33% 5 -1.50% 1 0.93% 2 -1.43%
1977-1 -0.32% 2 0.28% 3 -0.06% 4 0.41% 5 0.30%
1981-1 0.07% 5 -0.20% 1 -1.54% 2 -0.32% 3 -1.99%
Avg -0.28% 0.09% -0.95% 0.07% -1.08%
 
1985-1 0.30% 5 -0.07% 1 0.14% 2 0.27% 3 0.63%
1989-1 0.44% 3 0.48% 4 0.74% 5 -0.84% 1 0.82%
1993-1 -0.58% 5 0.54% 2 0.22% 3 0.05% 4 0.23%
1997-1 -0.19% 5 0.32% 1 -1.42% 2 -0.38% 3 -1.66%
2001-1 1.25% 4 1.84% 5 0.30% 1 3.61% 2 7.00%
Avg 0.24% 0.62% 0.00% 0.54% 1.41%
 
Averages -0.02% 0.35% -0.48% 0.31% 0.16%
% Winners 40% 70% 40% 50% 50%
MDD 6/4/1973 2.35% -- 6/3/1981 2.05% -- 6/4/1997 1.79%
 
OTC all years 1963 - 2004
Averages 0.26% 0.14% 0.26% 0.28% 0.95%
% Winners 71% 59% 71% 64% 69%
MDD 6/3/2002 4.25% -- 6/5/1967 3.52% -- 6/3/1998 2.91%
 
SPX presidential Year 1
  Day1 Day1 Day2 Day3 Totals
1929-1 0.85% 5 0.36% 6 1.40% 1 1.46% 2 4.08%
1933-1 -1.43% 3 1.04% 4 4.00% 5 -2.76% 6 0.85%
1937-1 0.00% 5 -1.85% 2 0.69% 3 0.19% 4 -0.97%
1941-1 -0.32% 6 0.11% 1 1.18% 2 -0.11% 3 0.86%
 
1945-1 -0.66% 4 0.13% 5 0.20% 6 -0.07% 1 -0.40%
1949-1 -2.21% 2 -0.35% 3 0.00% 4 -0.64% 5 -3.19%
1953-1 0.33% 5 -1.59% 1 0.29% 2 -0.17% 3 -1.14%
1957-1 0.68% 5 -0.13% 1 -0.19% 2 -0.02% 3 0.34%
1961-1 0.20% 3 0.00% 4 0.26% 5 0.52% 1 0.98%
Avg -0.33% -0.39% 0.11% -0.07% -0.68%
 
1965-1 0.66% 5 -0.79% 2 -0.72% 3 -0.22% 4 -1.07%
1969-1 0.19% 4 -0.50% 1 -0.30% 2 -0.04% 3 -0.65%
1973-1 -0.91% 4 -0.97% 5 -0.92% 1 1.60% 2 -1.20%
1977-1 -0.16% 2 0.84% 3 -0.20% 4 0.98% 5 1.47%
1981-1 -0.64% 5 -0.14% 1 -1.35% 2 0.07% 3 -2.06%
Avg -0.17% -0.31% -0.70% 0.48% -0.70%
 
1985-1 0.96% 5 -0.12% 1 0.38% 2 0.06% 3 1.28%
1989-1 0.46% 3 0.45% 4 1.10% 5 -1.07% 1 0.94%
1993-1 -0.49% 5 0.81% 2 0.00% 3 -0.30% 4 0.02%
1997-1 0.50% 5 -0.23% 1 -0.10% 2 -0.63% 3 -0.47%
2001-1 0.62% 4 0.39% 5 0.51% 1 1.30% 2 2.82%
Avg 0.41% 0.26% 0.38% -0.13% 0.92%
 
Averages -0.07% -0.13% 0.33% 0.01% 0.13%
% Winners 53% 42% 58% 42% 53%
MDD 6/3/1949 3.17% -- 6/4/1973 2.78% -- 6/3/1933 2.76%
 
SPX all years 1928 - 2004
Averages 0.11% -0.01% 0.15% 0.18% 0.42%
% Winners 58% 49% 61% 56% 58%
MDD 6/2/1931 8.34% -- 6/2/1934 4.49% -- 6/4/1962 3.96%

The market has good upward momentum, but is overbought. Seasonally the end of May early June period is modestly positive.

I expect the major indices to be higher on Friday June 3 than they were on Friday May 27.

If you are lucky enough to be in Minnesota this summer and would like to attend our FastTrack user group meeting on the 1st Wednesday of the month, let me know and I will put you on the meeting notification list.

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