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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…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

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Technical Market Report for August 15, 2015

The good news is:
• The equity market held up pretty well considering the turmoil in the FX market.


The negatives

New lows held at uncomfortably high levels last week while new highs remained insignificant.

The first chart covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH), in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

The OTC is only 3.3% off its all time high while OTC NH is falling off the bottom of the chart.

OTC and OTC NH Chart

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

The SPX is only 1.8% off its all time high while NY NH is rolling along the bottom of the chart.

APX and NY NH Chart

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 finished the week at a weak 29% and appears to be going nowhere.

NY HL Ratio Chart

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

OTC HL Ratio at 33% is only slightly stronger than NY HL Ratio and also appears to be directionless.

OTC HL Ratio Chart


The positives

The turmoil in the FX market last week probably contributed to volatility in the equity markets. New lows declined a little last week, but not in a way that would suggest a bottom. Next week seasonality is modestly positive.

The chart below covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue. 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, but not in a very convincing way.

NY NL Chart

The next chart is similar to the one above except is shows the OTC in blue and OTC NL, in orange, has been calculated from NASDAQ data.

OTC NL has been a little weaker than NY NL, but both rose last week.

OTC NL Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of August 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 3rd Friday of August 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 positive by all measures.

Report for the week before the 3rd Friday of August.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 0.47% 0.06% 0.35% 0.61% 0.17% 1.66%
1967-3 -0.29% -0.63% 0.00% -0.24% -0.20% -1.36%
1971-3 2.00% 0.99% -0.50% -0.35% -0.11% 2.03%
 
1975-3 -0.13% 0.19% -0.64% -0.81% 0.17% -1.22%
1979-3 0.69% 0.16% 0.57% 0.20% 0.27% 1.90%
1983-3 0.73% -0.64% 0.33% -0.35% -0.23% -0.15%
1987-3 0.01% -1.08% 0.27% 1.07% 0.54% 0.81%
1991-3 0.33% 0.86% 0.64% -0.39% -0.62% 0.82%
Avg 0.33% -0.10% 0.23% -0.05% 0.03% 0.43%
 
1995-3 0.83% 0.00% 1.32% 0.33% 0.20% 2.69%
1999-3 0.28% 0.98% -0.51% -1.37% 1.03% 0.42%
2003-3 1.06% 1.53% -0.02% 0.81% 0.10% 3.49%
2007-3 -0.10% -1.70% -1.61% -0.32% 2.00% -1.73%
2011-3 1.88% -1.24% -0.47% -2.00% -1.62% -3.46%
Avg 0.79% -0.11% -0.26% -0.51% 0.34% 0.28%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.60% -0.04% -0.02% -0.21% 0.13% 0.45%
Win% 77% 58% 50% 38% 62% 62%
 
OTC summary for all years 1963 - 2014
Avg 0.23% 0.00% 0.16% -0.04% -0.04% 0.32%
Win% 67% 49% 62% 53% 56% 56%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 -0.09% -0.74% 0.10% -0.14% 0.43% -0.45%
1959-3 -0.20% -0.93% -0.60% 1.49% -0.10% -0.34%
1963-3 0.16% 0.28% 0.40% 0.44% 0.15% 1.43%
1967-3 -0.54% 0.14% -0.23% 0.08% 0.16% -0.39%
1971-3 3.21% 1.25% -1.39% -0.45% 0.17% 2.79%
Avg 0.51% 0.00% -0.35% 0.28% 0.16% 0.61%
 
1975-3 0.62% 0.66% -1.32% -0.43% 0.89% 0.41%
1979-3 0.96% 0.09% 0.68% -0.15% 0.19% 1.78%
1983-3 0.96% -0.18% 1.15% -1.05% 0.26% 1.13%
1987-3 0.04% -1.45% 0.18% 1.52% 0.32% 0.59%
1991-3 0.23% 0.41% 0.07% -0.15% -0.96% -0.39%
Avg 0.56% -0.09% 0.15% -0.05% 0.14% 0.70%
 
1995-3 0.83% -0.21% 0.25% -0.17% 0.03% 0.74%
1999-3 0.23% 1.01% -0.84% -0.70% 0.98% 0.68%
2003-3 0.31% 1.00% -0.64% 0.66% 0.02% 1.34%
2007-3 -0.05% -1.82% -1.39% 0.32% 2.46% -0.47%
2011-3 2.18% -0.97% 0.09% -4.46% -1.50% -4.66%
Avg 0.70% -0.20% -0.50% -0.87% 0.40% -0.47%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg 0.59% -0.10% -0.23% -0.21% 0.23% 0.28%
Win% 73% 53% 53% 40% 80% 60%
 
SPX summary for all years 1953 - 2014
Avg 0.17% 0.00% 0.00% -0.06% 0.06% 0.17%
Win% 65% 50% 57% 50% 60% 53%


Money supply (M2)

The money supply chart was provided by Gordon Harms. M2 growth has been declining at its trend.

S&P500 and M2 Money Supply Charts


Conclusion

There is not much to go on this week. Both the breadth indicators and seasonality are indecisive, but both are modestly positive.

I expect the major averages to be higher on Friday August 21 than they were on Friday August 14.

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

Good Luck,

YTD W 12 / L 12 / T 8

 

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