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Technical Market Report for August 6, 2016

The good news is:
• New highs are strong, new lows are minimal and the secondaries are outperforming the blue chips.


The Negatives

The market is overbought.


The positives

New highs have been holding at comfortable levels and new lows have remained at insignificant levels.

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 fell a little last week, but finished the week at a very strong 78%.

OTC and OTC HL Ratio Chart

The next chart 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 also fell a little last week, but finished the week at an extremely high 94%.

SPX and NY HL Ratio Chart

The next chart shows the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

OTC NH declined a bit last week, but finished the week at a very comfortable 129.

OTC and OTC NH Chart

The next chart is similar to the one above except is shows the SPX in red and NY NH, in green, has been calculated from NYSE data.

NY NH also declined a little last week, but at 214 it is in the stratosphere.

SPX and NY NH Chart


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of August 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 1953 to 2015. There are summaries for both the 4th 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 positive by all measures and stronger during the 4th year of the Presidential Cycle than other years.

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

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.10% 0.17% 0.72% 0.47% 0.12% 1.58%
1968-4 -0.97% 0.40% 0.00% 0.42% -0.08% -0.23%
1972-4 0.02% -0.27% 0.11% 0.07% 0.64% 0.57%
 
1976-4 -0.34% 0.61% -0.09% 0.09% -0.09% 0.19%
1980-4 -0.35% 0.37% 0.54% 1.03% 0.37% 1.95%
1984-4 1.23% -0.07% -0.43% 0.93% 0.84% 2.50%
1988-4 -0.01% -0.88% -1.49% 0.16% -0.04% -2.27%
1992-4 -0.10% -0.27% -0.13% 0.02% 0.38% -0.10%
Avg 0.09% -0.05% -0.32% 0.45% 0.29% 0.46%
 
1996-4 -0.39% 0.75% 1.08% -0.32% -0.02% 1.11%
2000-4 2.00% -0.37% 0.13% -2.43% 0.78% 0.11%
2004-4 -0.13% 1.92% -1.45% -1.68% 0.27% -1.07%
2008-4 -1.10% 2.81% 1.21% -0.95% 2.48% 4.45%
2012-4 0.74% 0.87% -0.15% 0.25% 0.07% 1.78%
Avg 0.22% 1.20% 0.16% -1.03% 0.72% 1.27%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg 0.05% 0.46% 0.00% -0.15% 0.44% 0.81%
Win% 38% 62% 50% 69% 69% 69%
 
OTC summary for all years 1963 - 2015
Avg -0.30% 0.14% 0.12% 0.07% 0.04% 0.06%
Win% 45% 53% 62% 62% 49% 58%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -1.57% 0.61% 0.41% -0.08% -0.47% -1.10%
1960-4 0.14% 0.58% 0.41% 0.37% 0.68% 2.18%
1964-4 -0.10% -0.02% 0.50% 0.29% -0.07% 0.60%
1968-4 0.23% 0.41% 0.00% -0.22% -0.03% 0.39%
1972-4 0.16% 0.07% 0.15% 0.17% 0.81% 1.37%
Avg -0.23% 0.33% 0.37% 0.11% 0.18% 0.69%
 
1976-4 -0.29% 0.89% -0.34% 0.15% 0.03% 0.45%
1980-4 -0.19% -0.20% 0.67% 1.44% 0.25% 1.97%
1984-4 0.15% 0.07% -0.59% 2.34% -0.07% 1.90%
1988-4 -0.43% -1.29% -1.72% 0.32% -0.08% -3.20%
1992-4 0.13% -0.12% -0.27% -0.01% 0.52% 0.25%
Avg -0.13% -0.13% -0.45% 0.85% 0.13% 0.27%
 
1996-4 -0.34% 0.33% 0.27% -0.24% -0.07% -0.06%
2000-4 1.12% 0.24% -0.67% -0.86% 0.79% 0.62%
2004-4 0.12% 1.30% -0.30% -1.17% 0.15% 0.09%
2008-4 -0.90% 2.87% 0.34% -1.79% 2.39% 2.91%
2012-4 0.23% 0.51% 0.06% 0.04% 0.22% 1.07%
Avg 0.05% 1.05% -0.06% -0.80% 0.70% 0.93%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.10% 0.42% -0.08% 0.05% 0.34% 0.63%
Win% 53% 73% 57% 53% 60% 80%
 
SPX summary for all years 1953 - 2015
Avg -0.29% 0.18% 0.07% 0.07% 0.07% 0.10%
Win% 41% 59% 55% 49% 54% 57%


Conclusion

Central banks continue to use BREXIT as an excuse to print money and that money continues to find its way into equities and debt.

I expect the major averages to be higher on Friday August 12 than they were on Friday August 5.

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 13 / L 14 / T 4

 

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