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Technical Market Report

The good news is:
 • There has not been a significant build up of new lows.

The new high indicator (NH) is a 10% trend (19 day EMA) of NASDAQ new highs.

The chart below shows the NASDAQ composite (OTC) in red and NH in green.

The chart covers this calendar year, there are dashed vertical lines drawn on the 1st trading day of each month.

NH is a good short term indicator and it is falling. The current value of the indicator is 86 so it will require more than 86 NASDAQ new highs to turn the indicator upward.

Summation indices (SI) are running totals of oscillator values. The chart below shows the OTC in red along with SI's calculated from oscillators generated from NASDAQ advances - declines, new highs - new lows and upside - downside volume. SI's are good intermediate term indicators and they are all heading downward.

The market has been falling since early this month and could be called oversold. The next chart shows the OTC in red and momentum of the ratio of NASDAQ advancing issues / advancing + declining issues in purple. The indicator is as low as it has been at any time this year indicating an oversold condition from which a short term rally is likely.

The next chart shows the OTC in red, a 4% trend of NASADAQ volume of advancing issues (UV) in green and a 4% trend of NASDAQ volume of declining issues (DV) in blue. DV has been plotted on an inverted Y axis so increasing DV moves the indicator downward (up is good and down is bad). The decline since early this month has been accompanied by a sharp decrease in UV and only a modest increase in DV indicating the decline has been caused more by a lack of buying than aggressive selling.

The next chart shows the Russell 2000 (R2K) in red and the percentage of the R2K component issues that are above their respective 50 day EMA's in green. This indicator gave a leading indication of the late April bottom and the early August top. Nothing about it suggests a bottom near.

Seasonally the week following the 3rd Friday in August during the 1st year of the presidential cycle has been modestly positive. Since 1965 both the OTC and S&P 500 (SPX) have been up 70% of the time.

Report for the week following options expiration in August

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.38% 0.00% 0.02% 0.36% 0.20% 0.95%
 
1969-1 0.94% 1.49% 0.25% 0.24% 0.50% 3.42%
1973-1 -1.00% -0.54% -0.76% 1.17% -0.13% -1.25%
1977-1 0.20% -0.11% -0.19% -0.61% -0.25% -0.95%
1981-1 -2.90% -1.48% 0.02% -0.50% 0.37% -4.50%
1985-1 -0.28% 0.25% 0.44% -0.27% -0.06% 0.08%
Avg -0.61% -0.08% -0.05% 0.01% 0.09% -0.64%
 
1989-1 -0.79% 0.01% 0.77% 0.87% 0.19% 1.04%
1993-1 -0.01% 0.59% -0.20% -0.31% 0.37% 0.43%
1997-1 0.48% 1.99% 1.75% -1.34% -0.50% 2.37%
2001-1 0.77% -2.66% 1.57% -0.92% 4.01% 2.77%
Avg 0.11% -0.02% 0.97% -0.43% 1.01% 1.65%
 
OTC summary for Presidential year 1 1965 - 2001
Avg -0.22% -0.05% 0.36% -0.13% 0.47% 0.43%
Win% 50% 56% 70% 40% 60% 70%
 
OTC summary for all years 1963 - 2004
Avg -0.07% -0.03% 0.37% -0.12% 0.08% 0.21%
Win% 40% 55% 68% 52% 57% 62%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1929-1 0.86% 0.59% -0.42% 0.79% 0.00% 1.81%
1933-1 1.61% 1.58% -1.28% 0.93% 3.68% 6.51%
1937-1 -0.78% 0.79% -0.72% -1.94% 0.00% -2.66%
1941-1 0.60% 0.10% 0.39% -0.10% 0.00% 0.99%
1945-1 -1.50% 0.42% 0.69% 1.99% 1.35% 2.94%
Avg 0.15% 0.70% -0.27% 0.33% 2.51% 1.92%
 
1949-1 -0.26% -1.30% 0.07% 0.26% 0.39% -0.84%
1953-1 -1.07% -0.66% -0.29% -0.29% -0.21% -2.53%
1957-1 -2.01% 0.85% 0.44% -0.73% -1.44% -2.88%
1961-1 0.21% 0.01% -0.67% -0.57% 0.12% -0.91%
1965-1 -0.15% 0.17% 0.12% 0.38% 0.07% 0.59%
Avg -0.66% -0.19% -0.07% -0.19% -0.21% -1.31%
 
1969-1 0.61% 0.53% 0.00% 0.29% 0.60% 2.03%
1973-1 -0.68% -0.71% -0.36% 1.37% -0.28% -0.66%
1977-1 0.29% -0.17% -0.40% -1.11% -0.09% -1.49%
1981-1 -2.89% -0.29% -0.14% -1.16% 0.46% -4.02%
1985-1 0.15% 0.91% 0.57% -0.95% -0.10% 0.58%
Avg -0.51% 0.05% -0.08% -0.31% 0.12% -0.71%
 
1989-1 -1.55% 0.15% 1.03% 1.98% -0.28% 1.33%
1993-1 -0.20% 1.00% 0.08% 0.20% -0.11% 0.96%
1997-1 1.30% 1.48% 1.44% -1.52% -0.16% 2.53%
2001-1 0.81% -1.21% 0.70% -0.28% 1.97% 1.99%
Avg 0.09% 0.36% 0.81% 0.09% 0.35% 1.70%
 
SPX summary for Presidential year 1 1929 - 2001
Avg -0.25% 0.22% 0.07% -0.02% 0.37% 0.33%
Win% 47% 68% 56% 47% 50% 58%
 
SPX summary for all years 1928 - 2004
Avg -0.17% 0.20% 0.16% -0.08% 0.02% 0.11%
Win% 40% 60% 56% 49% 52% 56%

There is no indication of a bottom, but the market is oversold and seasonally next week has a positive bias.

I expect the major indices to be higher on Friday August 26 than they were on Friday August 19.

This report is free to anyone who wants it, so please tell your friends. If it is not for you, reply with REMOVE in the subject line.

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