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Technical Market Report for August 20, 2016

The good news is:
• New lows remain insignificant and the secondaries are outperforming the blue chips.


The Negatives

The market is overbought.

New highs declined a bit last week, but remain at comfortable levels.

Volume is at its lowest level in a long time.


The positives

Last week the secondaries outperformed the blue chips, the reverse of the previous week. Weekly movements have been less than 1% for all of the major indices.

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 continued to dance around the 80% line where it has been for a while. This is very strong.

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 has been holding above 90%. No threats here.

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 fell a bit to 132 last week, but, still near its highest level in over 2 years.

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 fell sharply, but is still very strong at 186.

SPX and NY NH Chart


Seasonality

Next week includes the 5 trading days prior to the 4th 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 modestly positive and stronger during the 4th year of the Presidential Cycle than other years.

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

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.56% -0.05% -0.51% 0.12% 0.46% 0.59%
1968-4 0.69% 0.69% 0.00% -0.50% 0.06% 0.94%
1972-4 -0.11% 0.00% -0.14% -0.53% -0.07% -0.85%
 
1976-4 -0.65% -0.52% 0.47% -0.39% -0.07% -1.17%
1980-4 -1.47% -0.54% 0.79% 1.26% 0.99% 1.03%
1984-4 -0.06% 1.24% 0.21% 0.10% 0.26% 1.75%
1988-4 -0.98% -0.05% 0.67% -0.53% 0.10% -0.79%
1992-4 -1.47% -0.21% 0.83% 0.80% 0.05% -0.01%
Avg -0.93% -0.02% 0.59% 0.25% 0.27% 0.16%
 
1996-4 -0.25% -0.55% 0.19% 1.53% -0.08% 0.84%
2000-4 0.58% 0.13% 1.33% 1.05% -0.26% 2.84%
2004-4 0.04% -0.10% 1.30% -0.42% 0.49% 1.31%
2008-4 -1.45% -1.35% 0.20% -0.36% 1.44% -1.52%
2012-4 -0.01% -0.29% 0.21% -0.66% 0.54% -0.22%
Avg -0.22% -0.43% 0.64% 0.23% 0.43% 0.65%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.35% -0.13% 0.46% 0.11% 0.30% 0.37%
Win% 31% 25% 83% 46% 69% 54%
 
OTC summary for all years 1963 - 2015
Avg -0.16% 0.02% 0.41% -0.10% 0.21% 0.36%
Win% 40% 55% 67% 53% 64% 60%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -1.17% -0.75% -0.98% 1.22% -0.10% -1.78%
Avg -1.17% -0.75% -0.98% 1.22% -0.10% -1.78%
 
1960-4 0.32% 0.98% 0.55% -0.48% -0.33% 1.04%
1964-4 -0.19% -0.57% -0.15% 0.47% 0.35% -0.09%
1968-4 0.32% -0.04% 0.00% -0.26% -0.01% 0.01%
1972-4 -0.04% 0.62% -0.13% -1.10% -0.32% -0.97%
1976-4 -0.40% -0.68% 0.75% -0.70% 0.16% -0.86%
Avg 0.00% 0.06% 0.26% -0.42% -0.03% -0.18%
 
1980-4 -1.85% -0.64% 0.95% 1.37% 0.45% 0.27%
1984-4 0.49% 1.75% -0.46% 0.04% 0.23% 2.05%
1988-4 -1.25% 0.04% 1.57% -0.75% 0.19% -0.19%
1992-4 -1.00% 0.22% 0.46% 0.00% 0.32% 0.00%
1996-4 0.21% -0.14% -0.09% 0.85% -0.55% 0.28%
Avg -0.68% 0.25% 0.49% 0.30% 0.13% 0.48%
 
2000-4 0.52% -0.09% 0.52% 0.16% -0.12% 0.99%
2004-4 -0.24% 0.05% 0.80% 0.01% 0.24% 0.86%
2008-4 -1.51% -0.93% 0.62% 0.25% 1.13% -0.44%
2012-4 0.00% -0.35% 0.02% -0.81% 0.65% -0.49%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.39% -0.04% 0.32% 0.02% 0.15% 0.04%
Win% 33% 40% 64% 60% 60% 53%
 
SPX summary for all years 1953 - 2015
Avg -0.19% 0.03% 0.26% -0.14% 0.03% -0.01%
Win% 41% 56% 61% 48% 51% 60%


Conclusion

There has been no volume, but, other than that, there is nothing technically disconcerting going on.

I expect the major averages to be higher on Friday August 26 than they were on Friday August 19.

Last week the Russell 2000 and OTC were up slightly while the SPX and Dow Jones Industrial Average were down slightly so I am calling last weeks positive forecast a tie.

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

Good Luck,

YTD W 13 / L 14 / T 6

 

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