The good news is:
• The market has had 2 consecutive winning weeks with the secondaries outperforming the blue chips.
The Negatives
New lows have remained a little high, especially on the NASDAQ where new lows outnumbered new highs every day last week except Monday.
The first chart 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. Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.
OTC HL Ratio rose a bit last week, but remained below the neutral level.
The positives
On the NYSE new highs outnumbered new lows on 3 of the 5 days.
The chart below 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 managed to climb into positive territory last week.
The next chart 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 continued its sharp move upward.
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 is showing a similar pattern to NY NL.
The next chart covers the past 4 years showing the SPX in red and a 5% trend (39 day EMA) of NYSE volume of advancing issues (NY UV) in green. Dashed vertical lines have been drawn on the 1st trading day of each year.
Since the 1st of the year we have been seeing the highest volume of advancing issues in over 4 years.
Seasonality
Next week includes the last trading day of February and the 1st 4 trading days of March during the 4th 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 2015 while SPX data runs from 1928 to 2015. There are summaries for both the 4th year of the Presidential Cycle and all years combined.
The coming week has been volatile with large gains some years and large losses in other years.
Report for the last day of February and first 4 days of March.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.
| OTC Presidential Year 4 | ||||||
| Day1 | Day1 | Day2 | Day3 | Day4 | Totals | |
| 1964-4 | -0.27% 5 | 0.56% 1 | -0.05% 2 | 0.13% 3 | 0.00% 4 | 0.38% |
| 1968-4 | 0.02% 4 | -0.94% 5 | -0.63% 1 | 0.59% 2 | -3.92% 3 | -4.87% |
| 1972-4 | 0.35% 2 | 0.73% 3 | 0.23% 4 | 0.48% 5 | 0.54% 1 | 2.33% |
| 1976-4 | -1.30% 5 | -0.01% 1 | 0.32% 2 | -0.41% 3 | -0.58% 4 | -1.98% |
| 1980-4 | 0.36% 5 | -0.73% 1 | -0.96% 2 | -1.56% 3 | -2.81% 4 | -5.70% |
| 1984-4 | 0.01% 3 | 0.37% 4 | 0.80% 5 | -0.66% 1 | -0.64% 2 | -0.11% |
| 1988-4 | 0.98% 1 | 0.10% 2 | 0.83% 3 | 0.44% 4 | 0.36% 5 | 2.71% |
| 1992-4 | -0.08% 5 | 0.32% 1 | -0.19% 2 | -0.62% 3 | -1.32% 4 | -1.90% |
| Avg | -0.01% | 0.01% | 0.16% | -0.56% | -1.00% | -1.40% |
| 1996-4 | -0.68% 4 | -1.27% 5 | -0.11% 1 | 1.10% 2 | -0.46% 3 | -1.42% |
| 2000-4 | 2.60% 2 | 1.86% 3 | -0.62% 4 | 3.37% 5 | -0.20% 1 | 7.01% |
| 2004-4 | -0.14% 5 | 1.38% 1 | -0.88% 2 | -0.31% 3 | 1.07% 4 | 1.12% |
| 2008-4 | -2.58% 5 | -0.57% 1 | 0.07% 2 | 0.55% 3 | -2.30% 4 | -4.82% |
| 2012-4 | -0.67% 3 | 0.74% 4 | -0.43% 5 | -0.86% 1 | -1.36% 2 | -2.57% |
| Avg | -0.29% | 0.43% | -0.39% | 0.77% | -0.65% | -0.14% |
| OTC summary for Presidential Year 4 1964 - 2012 | ||||||
| Averages | -0.11% | 0.20% | -0.12% | 0.17% | -0.89% | -0.76% |
| % Winners | 46% | 62% | 38% | 54% | 23% | 38% |
| MDD 3/6/1980 5.94% -- 3/6/1968 4.86% -- 3/6/2008 4.76% | ||||||
| OTC summary for all years 1963 - 2015 | ||||||
| Averages | -0.10% | 0.19% | 0.02% | 0.34% | -0.16% | 0.28% |
| % Winners | 47% | 63% | 51% | 68% | 54% | 58% |
| MDD 3/5/2009 6.60% -- 3/6/1980 5.94% -- 3/6/1968 4.86% | ||||||
| SPX Presidential Year 4 | ||||||
| Day1 | Day1 | Day2 | Day3 | Day4 | Totals | |
| 1928-4 | 0.58% 3 | 0.23% 4 | 0.00% 5 | 0.69% 6 | 0.86% 1 | 2.37% |
| 1932-4 | -0.72% 1 | 0.72% 2 | 4.31% 3 | 0.00% 4 | 0.11% 5 | 4.43% |
| 1936-4 | -0.34% 6 | 1.51% 1 | 1.42% 2 | 0.27% 3 | 0.13% 4 | 2.99% |
| 1940-4 | -0.16% 4 | -0.58% 5 | 0.17% 6 | 0.08% 1 | 0.50% 2 | 0.00% |
| 1944-4 | -0.59% 2 | 0.42% 3 | 0.08% 4 | 0.17% 5 | 0.00% 6 | 0.09% |
| 1948-4 | 0.50% 6 | 0.50% 1 | 0.64% 2 | 0.07% 3 | -0.64% 4 | 1.08% |
| 1952-4 | -0.13% 5 | 0.09% 6 | 0.04% 1 | 1.67% 2 | 0.13% 3 | 1.80% |
| Avg | -0.14% | 0.39% | 0.47% | 0.45% | 0.02% | 1.19% |
| 1956-4 | -0.20% 3 | 0.44% 4 | 0.59% 5 | 0.55% 1 | -0.04% 2 | 1.34% |
| 1960-4 | -0.07% 1 | -0.20% 2 | -0.70% 3 | -1.51% 4 | -0.38% 5 | -2.86% |
| 1964-4 | 0.23% 5 | 0.22% 1 | 0.32% 2 | -0.19% 3 | -0.01% 4 | 0.57% |
| 1968-4 | -0.80% 4 | -0.28% 5 | -1.34% 1 | -0.23% 2 | 1.76% 3 | -0.89% |
| 1972-4 | 0.36% 2 | 0.73% 3 | -0.03% 4 | 0.58% 5 | 0.77% 1 | 2.41% |
| Avg | -0.10% | 0.18% | -0.23% | -0.16% | 0.42% | 0.11% |
| 1976-4 | -0.40% 5 | 0.31% 1 | 0.54% 2 | -0.58% 3 | -1.06% 4 | -1.19% |
| 1980-4 | 1.17% 5 | -1.02% 1 | 0.25% 2 | -1.46% 3 | -2.23% 4 | -3.30% |
| 1984-4 | 0.15% 3 | 0.72% 4 | 0.66% 5 | -0.85% 1 | -1.04% 2 | -0.35% |
| 1988-4 | 2.04% 1 | -0.22% 2 | 0.28% 3 | -0.04% 4 | -0.22% 5 | 1.85% |
| 1992-4 | -0.28% 5 | -0.06% 1 | 0.10% 2 | -0.85% 3 | -0.69% 4 | -1.79% |
| Avg | 0.54% | -0.05% | 0.37% | -0.76% | -1.05% | -0.95% |
| 1996-4 | -0.67% 4 | 0.62% 5 | 1.00% 1 | 0.77% 2 | -0.58% 3 | 1.13% |
| 2000-4 | 1.36% 2 | 0.94% 3 | 0.19% 4 | 1.98% 5 | -1.27% 1 | 3.20% |
| 2004-4 | 0.00% 5 | 0.96% 1 | -0.59% 2 | 0.17% 3 | 0.33% 4 | 0.87% |
| 2008-4 | -2.71% 5 | 0.05% 1 | -0.34% 2 | 0.52% 3 | -2.20% 4 | -4.68% |
| 2012-4 | -0.47% 3 | 0.62% 4 | -0.32% 5 | -0.39% 1 | -1.54% 2 | -2.11% |
| Avg | -0.50% | 0.64% | -0.01% | 0.61% | -1.05% | -0.32% |
| SPX summary for Presidential Year 4 1928 - 2012 | ||||||
| Averages | -0.05% | 0.31% | 0.33% | 0.06% | -0.33% | 0.32% |
| % Winners | 41% | 73% | 68% | 55% | 36% | 64% |
| MDD 3/6/2008 4.63% -- 3/6/1980 4.41% -- 3/4/1960 2.83% | ||||||
| SPX summary for all years 1928 - 2015 | ||||||
| Averages | 0.04% | 0.15% | 0.17% | 0.23% | 0.10% | 0.67% |
| % Winners | 56% | 64% | 55% | 62% | 53% | 65% |
| MDD 3/5/2009 9.34% -- 3/6/2008 4.63% -- 3/6/1980 4.41% | ||||||
Money supply (M2)
The charts were provided by Gordon Harms. Money supply growth leveled off last week.
Conclusion
New lows continued to decline and the secondaries continued to lead the blue chips upward last week.
I expect the major averages to be higher on Friday March 4 than they were on Friday February 26.
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Good Luck,
YTD W 5 / L 3 / T 0
