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Technical Market Report for January 18, 2014

The good news is:
• Some of the major indices closed at all time highs last Wednesday.


The negatives

Negatives are pretty hard to find.

The market is just marking time.

Precious metals and Retail switched positions from a few weeks ago, that is Gold was cold and now it is hot while Retail was hot and now it is cold. Health care picked up after a little weakness and energy fell after a little strength.

Pretty boring.


The positives

The breadth indicators remained mostly flat, but at pretty strong levels.

The chart below covers the past 6 months showing the NASDAQ composite (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 vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio has remained flat in the low 90% level for nearly a month.

There are trading systems that impose a No Sell Filter when variations of this indicator are above 80%.

OTC versus OTC HL Ratio Chart

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio has been flat at around 90% for the past 2 weeks.

SPX versus NYSE HL Ratio Chart


Seasonality

Next week includes the 5 trading days prior to the 4th Friday of January during the 2nd year of the Presidential Cycle.

The tables show the daily percentage return for the 5 trading days prior to 4th Friday of January during the 2nd year of the Presidential Cycle.

OTC data covers the period from 1963 - 2013 while SPX data runs from 1953 - 2013. There are summaries for both the 2nd 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.

The averages for the coming week have been nearly unchanged, however, they have been a little weaker during the 2nd year of the Presidential Cycle than all years combined.

Report for the week before the 4th Friday of January.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.12% -0.07% 0.27% -0.08% 0.02% 0.25%
1970-2 -0.93% -0.91% 0.00% 0.31% 0.18% -1.36%
 
1974-2 -0.88% 0.86% 0.49% -0.16% -0.22% 0.09%
1978-2 -0.29% 0.20% 0.33% -0.34% 0.09% -0.01%
1982-2 -1.24% -0.06% 0.09% 1.44% 1.17% 1.39%
1986-2 -0.37% -0.30% -0.54% -0.02% 0.66% -0.56%
1990-2 -2.03% -0.38% -1.08% -0.10% -0.92% -4.50%
Avg -0.96% 0.06% -0.14% 0.17% 0.16% -0.72%
 
1994-2 -0.46% -0.54% 0.31% 0.52% 0.46% 0.29%
1998-2 0.00% 1.74% -0.14% -0.72% -0.04% 0.85%
2002-2 0.00% -2.48% 2.12% 1.05% -0.25% 0.44%
2006-2 0.03% 0.75% -0.20% 0.99% 0.93% 2.50%
2010-2 0.25% -0.32% 0.80% -1.91% -1.45% -2.63%
Avg -0.06% -0.17% 0.58% -0.01% -0.07% 0.29%
 
OTC summary for Presidential Year 2 1966 - 2010
Avg -0.58% -0.13% 0.22% 0.08% 0.05% -0.27%
Win% 30% 33% 64% 42% 58% 58%
 
OTC summary for all years 1963 - 2013
Avg -0.15% -0.10% 0.28% 0.06% 0.01% 0.12%
Win% 54% 48% 57% 47% 68% 58%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.31% 0.62% -0.31% 0.04% 0.23% 0.89%
Avg 0.31% 0.62% -0.31% 0.04% 0.23% 0.89%
 
1958-2 0.61% -0.12% -0.24% 0.39% 0.85% 1.48%
1962-2 0.09% -0.76% 0.16% -0.07% -0.32% -0.90%
1966-2 0.26% 0.15% -0.16% -0.03% -0.38% -0.17%
1970-2 -1.40% 0.20% 0.09% 0.04% -0.98% -2.04%
1974-2 -0.17% 1.21% 0.54% -0.26% -0.20% 1.12%
Avg -0.12% 0.14% 0.08% 0.01% -0.21% -0.10%
 
1978-2 -0.72% 0.01% 0.16% -0.91% 0.00% -1.46%
1982-2 0.03% -0.19% 0.48% 2.75% 1.24% 4.30%
1986-2 -0.43% -0.84% -1.12% 0.37% 1.07% -0.95%
1990-2 -2.59% 0.37% -0.41% -1.27% -0.09% -3.97%
1994-2 -0.58% -0.22% 0.48% 0.81% 0.35% 0.84%
Avg -0.86% -0.17% -0.08% 0.35% 0.64% -0.25%
 
1998-2 0.00% 1.78% -0.80% -0.80% -0.57% -0.38%
2002-2 0.00% -0.73% 0.79% 0.35% 0.10% 0.51%
2006-2 0.18% 0.24% -0.17% 0.72% 0.78% 1.75%
2010-2 0.46% -0.42% 0.49% -1.18% -0.98% -1.64%
 
SPX summary for Presidential Year 2 1954 - 2010
Avg -0.30% 0.09% 0.00% 0.06% 0.08% -0.04%
Win% 54% 53% 53% 53% 50% 47%
 
SPX summary for all years 1953 - 2013
Avg -0.10% 0.01% 0.21% 0.12% 0.00% 0.26%
Win% 52% 59% 57% 58% 55% 66%


Conclusion

We are experiencing the summer doldrums in January and there is not much that suggests a change.

I expect the major averages to be higher on Friday January 24 than they were on Friday January 17.

Last week most of the major averages were up a little while the SPX was down a little 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 talks about following the Wall Street Herd. You can read about it and subscribe to his free letter at: http://alphaim.net/

Good Luck,

YTD W 0/L 1/T 2

 

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