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Technical Market Report for December 5, 2015

The good news is:
• At the end of a very volatile week most of the major indices were up.


The negatives

New lows finished the week at their highest levels in nearly a month.

The chart below covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH), in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

In late June (A) the SPX hit an all time high and NY NH also hit a high for the period.

In mid July (B) the SPX hit a new all time high while NY NH was lower than it had been in late June. This pattern is called a non confirmation.

A sharp decline followed about a month later.

Around November 1 (C) the SPX came close to its old high while NY NH did the same.

Around December 1 (D) the SPX came near its level of a month earlier while NY NH made a lower high.

Another non confirmation.

SPX and NY NH Chart

The next chart is similar to the one above except it shows the NASDAQ composite (OTC) in blue and OTC NH, in green has been calculated from NASDAQ data.

The patterns are the same as in the chart above.

OTC and OTC NH Chart

The next chart covers the past 6 months showing the SPX in red and a 10% trend 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).

The description of the previous 2 charts also fits this one.

SPX and NY NL Chart

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

Ditto for the description.

OTC and OTC NL 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.

I view NY HL Ratio and OTC HL Ratio as indicators of market condition and not necessarily predictive, however you can see the pattern of non confirmations found in the charts above.

SPX and 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, while weak, has been the strongest of the indicators shown.

The December 1 high in the index was confirmed by OTC HL Ratio.

OTC and OTC HL Ratio Chart


The positives

The breadth indicators are mostly weak, but, in about a week, Seasonality becomes very positive.


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of December during the 3rd year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

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 and stronger during the 3rd year of the Presidential Cycle than other years.

Report for the week before the 2nd Friday of December.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.25% 0.14% 0.26% 0.25% -0.37% 0.03%
1967-3 0.87% 0.99% 0.47% 0.37% 0.09% 2.79%
1971-3 -0.32% 0.32% 0.42% 0.24% 0.78% 1.44%
 
1975-3 0.27% -0.53% 0.98% -0.23% -0.23% 0.26%
1979-3 0.33% -0.09% 0.46% 0.31% 0.71% 1.71%
1983-3 -0.50% -0.16% 0.04% -0.56% -0.02% -1.20%
1987-3 0.63% 1.08% 1.34% -0.38% 0.59% 3.26%
1991-3 -0.18% -0.21% -0.48% 0.82% 0.91% 0.86%
Avg 0.11% 0.02% 0.47% -0.01% 0.39% 0.98%
 
1995-3 1.37% -0.36% -0.39% -0.80% 0.87% 0.69%
1999-3 0.72% 1.15% -0.02% 0.23% 0.72% 2.80%
2003-3 0.57% -2.08% -0.19% 1.98% 0.34% 0.62%
2007-3 0.47% -2.45% 0.71% -0.10% -1.23% -2.59%
2011-3 1.10% -0.23% -0.01% -1.99% 1.94% 0.80%
Avg 0.85% -0.79% 0.02% -0.14% 0.53% 0.46%
 
OTC summary for Presidential Year 3 1963 - 2011
Avg 0.39% -0.19% 0.27% 0.01% 0.39% 0.88%
Win% 69% 38% 62% 54% 69% 85%
 
OTC summary for all years 1963 - 2014
Avg 0.15% 0.05% -0.04% -0.37% 0.23% 0.02%
Win% 62% 50% 51% 46% 56% 50%
 
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 0.57% 0.00% -0.33% 0.59% 0.15% 0.99%
1959-3 0.19% 0.64% -0.62% 0.08% -0.24% 0.06%
1963-3 -0.05% 0.04% -0.12% 0.01% 0.20% 0.08%
1967-3 0.63% 0.14% 0.43% -0.12% -0.12% 0.97%
1971-3 -0.57% 0.37% 0.05% 0.04% 0.75% 0.65%
Avg 0.15% 0.30% -0.12% 0.12% 0.15% 0.55%
 
1975-3 0.29% 0.26% 0.89% -0.32% 0.03% 1.16%
1979-3 0.14% -0.17% 0.03% 0.14% 1.16% 1.30%
1983-3 0.20% -0.18% 0.27% -0.43% -0.07% -0.21%
1987-3 2.16% 2.69% 1.69% -2.23% 0.75% 5.07%
1991-3 -0.22% -0.10% -0.05% 1.02% 0.77% 1.41%
Avg 0.51% 0.50% 0.57% -0.36% 0.53% 1.75%
 
1995-3 1.10% 0.65% 0.40% -0.65% 0.21% 1.73%
1999-3 -0.69% -1.00% -0.38% 0.30% 0.64% -1.13%
2003-3 0.73% -0.85% -0.11% 1.15% 0.27% 1.20%
2007-3 0.75% -2.53% 0.61% 0.12% -1.37% -2.42%
2011-3 1.03% 0.11% 0.20% -2.11% 1.69% 0.92%
Avg 0.59% -0.72% 0.15% -0.24% 0.29% 0.06%
 
SPX summary for Presidential Year 3 1955 - 2011
Avg 0.42% 0.01% 0.20% -0.16% 0.32% 0.78%
Win% 73% 57% 60% 60% 73% 80%
 
SPX summary for all years 1953 - 2014
Avg 0.18% 0.00% -0.01% -0.30% 0.19% 0.06%
Win% 58% 46% 52% 40% 65% 53%


Conclusion

We have a combination of Seasonal strength with weak breadth.

I expect the major averages to be lower on Friday December 11 than they were on Friday December 4.

Last week all of the major averages were up except the Russell 2000 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.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 18 / L 16 / T 14

 

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