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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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Technical Market Report for July 18, 2015

The good news is:
• The NASDAQ composite (OTC) closed at an all time high on Friday.


The negatives

Last weeks rally was impressive, the kind that makes one question one’s bearhood.

Bull markets begin with the disappearance of new lows and downside volume and continue with the secondaries leading the blue chips upward.

That is not what happened last week.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue. Dashed vertical lines have been drawn on the 1st trading day of each month. NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved upward last week until Friday when it turned downward in spite of an up day for the SPX. If the market were coming off a bottom NL would move upward whether or not the index was moving upward.

NY NL

The Hindenburg Omen is an indicator, developed by the late Jim Miekka, that triggers when the conditions are in place for a serious decline. One of the main criteria for the indicator is NYSE new highs and new lows must both be in excess of 2.3% of the issues traded. That criteria was met nearly every day last week.

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 has also moved upward last week, but, also turned downward on Friday.

OTC NL

FastTrack (fasttrack.net) has a relative strength indicator called Accutrack.

The chart below covers the past year showing the SPX in green, the Russell 2000 (R2K) in red and Accutrack as a histogram in yellow. Accutrack is above the neutral line when the R2K, representing the secondaries, is stronger than the blue chips, represented by the SPX.

It is significant that Accutrack fell below the neutral line during last weeks rally.

Accutrack

The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

NY HL Ratio rallied last week, but turned downward finishing the week at 43% maintaining the pattern of lower highs and lower lows.

NY HL Ratio


The positives

Last week, on the NASDAQ, new highs outnumbered new lows every day.

This is a significant positive tempered by the fact that new lows remained uncomfortably high.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend of NASDAQ new highs (OTC NH) in green.

OTC NH rose sharply last week, but failed to confirm the index high.

OTC NH

The next chart is similar to the last one in the first group except it shows the OTC in blue and OTC HL Ratio has been calculated from NASDAQ data.

OTC HL Ratio rallied to a comfortably positive 64%.

OTC HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 4th Friday of July during the 3rd year of the Presidential Cycle.

The tables below show the daily change, on a percentage basis for the 5 trading days prior to the 4th Friday of July during the 3rd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2014 while SPX data runs from 1953 to 2014 There are summaries for both the 3rd 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 modestly negative for the OTC and modestly positive for the SPX.

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

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.27% 0.30% -0.39% 0.99% -0.36% 0.28%
1967-3 0.21% -0.33% -0.06% 0.37% 0.76% 0.95%
1971-3 -0.55% 0.38% -0.05% -0.18% 0.08% -0.32%
 
1975-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1979-3 -0.30% 0.33% 0.69% 0.40% 0.36% 1.47%
1983-3 -0.82% 0.28% 1.80% 0.80% -2.69% -0.63%
1987-3 -0.06% 0.26% 0.29% 0.55% 0.31% 1.35%
1991-3 -0.51% -1.08% -0.46% 0.59% 0.49% -0.97%
Avg -0.42% -0.05% 0.58% 0.58% -0.38% 0.30%
 
1995-3 1.75% 1.55% 0.65% 1.05% -0.53% 4.46%
1999-3 -1.19% -3.47% 1.08% -2.80% 0.30% -6.08%
2003-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2007-3 0.11% -1.89% 0.31% -1.84% -1.43% -4.73%
2011-3 -0.89% 2.22% -0.43% 0.72% 0.86% 2.48%
Avg -0.05% -0.40% 0.40% -0.72% -0.20% -0.97%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg -0.23% -0.13% 0.31% 0.06% -0.17% -0.16%
Win% 27% 64% 55% 73% 64% 55%
 
OTC summary for all years 1963 - 2014
Avg -0.33% -0.13% 0.11% 0.10% -0.02% -0.26%
Win% 42% 56% 53% 65% 63% 53%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 -0.09% -0.61% 0.31% 0.97% 0.84% 1.42%
Avg -0.09% -0.61% 0.31% 0.97% 0.84% 1.42%
 
1959-3 0.62% 0.50% 0.50% -0.20% 0.02% 1.44%
1963-3 -0.66% 0.01% 0.54% -0.03% 0.41% 0.28%
1967-3 -0.33% 0.01% 0.34% 0.31% 0.15% 0.48%
1971-3 -0.18% 0.39% -0.04% -0.17% -0.17% -0.17%
1975-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Avg -0.14% 0.23% 0.34% -0.02% 0.10% 0.51%
 
1979-3 -0.23% 0.37% 1.09% 0.02% 0.00% 1.26%
1983-3 -0.21% 0.54% 2.71% -0.14% -0.10% 2.80%
1987-3 0.45% 0.54% 1.06% 0.76% 0.19% 3.00%
1991-3 -0.35% -0.90% -0.21% 0.61% -0.01% -0.85%
1995-3 0.54% 0.80% 0.09% 0.64% -0.41% 1.68%
Avg 0.04% 0.27% 0.95% 0.38% -0.08% 1.58%
 
1999-3 -0.78% -2.17% 0.16% -1.33% -0.29% -4.42%
2003-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2007-3 0.49% -1.98% 0.47% -2.33% -1.60% -4.96%
2011-3 -0.81% 1.63% -0.07% 1.35% 0.09% 2.20%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg -0.12% -0.07% 0.53% 0.04% -0.07% 0.32%
Win% 31% 69% 77% 54% 50% 69%
 
SPX summary for all years 1953 - 2014
Avg -0.18% -0.13% 0.30% 0.20% 0.00% 0.18%
Win% 33% 52% 60% 65% 62% 56%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth has leveled off at its trend line.

S&P500 and M2 Money Supply Chart


Conclusion

Last weeks rally had all the marks of a top it was unconfirmed by everything that matters.

I expect the major averages to be lower on Friday July 24 than they were on Friday July 17.

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.stockmarket-ta.com/signup.html. If it is not for you, reply with REMOVE in the subject line.

These reports are archived at: http://www.safehaven.com/

Good Luck,

YTD W 9 / L 11 / T 8

 

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