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Technical Market Report for September 10, 2016

The good news is:
• The NASDAQ composite (OTC) and S&P Mid cap indices closed at all time highs last Wednesday before falling to losses for the week.


The Negatives

2%+ declines are scary, but when they follow confirmed all time highs, scary is all they are.

The first chart 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.

I am presenting this chart a negative because the last high in NY NH was in early July and it has been falling ever since, failing to confirm the all time SPX high last month and well below its early July high. However, it could be worse. Over 25 years ago I developed a timing system called MIRAT and one of the parameters was a No Sell Filter imposed when NY NH was above 130. As of Friday's close NY NH was at 172. That was back in the day when the percentage of fixed income issues on the NYSE was much smaller than it is today. The extent to which the high percentage of fixed income issues contaminates the data is still unknown.

SPX and NY NH Chart


The positives

Most of the breadth indicators confirmed Wednesday's high.

The secondaries have been leading the blue chips upward.

On Friday, the worst day of the week, new lows remained at insignificant levels.

The next chart covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the 50%, neutral level.

OTC HL Ratio at 71% remains very strong.

OTC and OTC HL Ratio Chart

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

NY HL Ratio fell to a very strong 80%. On Friday, the worst day of the week, NYSE new highs outnumbered new lows.

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 confirmed Wednesday's all time high for the OTC.

OTC and OTC NH  6-Month Chart

The next chart is similar to the one above except it covers the past year.

OTC NH hit its highest level in nearly 3 years on Wednesday.

OTC and OTC NH  1-Year Chart


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of September 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.

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

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.26% 0.14% -0.12% 0.29% 0.31% 0.88%
1968-4 -0.07% 0.60% 0.00% 0.31% -0.13% 0.72%
1972-4 -0.67% -0.84% 0.26% 0.05% 0.07% -1.13%
 
1976-4 -0.25% -0.47% 0.11% 0.45% 0.63% 0.46%
1980-4 0.01% 0.91% 1.38% -0.18% 0.89% 3.01%
1984-4 -0.08% -0.55% -0.39% 0.05% -0.18% -1.15%
1988-4 0.12% 0.08% 0.38% -0.30% 0.32% 0.61%
1992-4 1.92% -1.07% -0.34% 0.33% 0.22% 1.07%
Avg 0.34% -0.22% 0.23% 0.07% 0.37% 0.80%
 
1996-4 0.45% 0.78% 0.20% 0.53% 0.63% 2.58%
2000-4 -2.06% -1.20% 1.15% 0.51% -2.01% -3.61%
2004-4 0.85% 0.26% -0.99% 0.40% 0.32% 0.84%
2008-4 -3.60% 1.28% -4.94% 4.78% 3.40% 0.92%
2012-4 -0.17% -0.03% 0.15% -0.21% 0.13% -0.12%
Avg -0.91% 0.22% -0.88% 1.20% 0.49% 0.12%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.25% -0.01% -0.26% 0.54% 0.35% 0.39%
Win% 46% 54% 58% 77% 77% 69%
 
OTC summary for all years 1963 - 2015
Avg 0.02% 0.21% 0.04% 0.19% 0.32% 0.78%
Win% 43% 57% 62% 64% 70% 64%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.04% -0.85% -1.18% -0.06% 0.80% -1.33%
1960-4 -0.61% 0.11% -0.70% -0.40% -0.20% -1.79%
1964-4 -0.28% -0.26% 0.29% 0.66% -0.37% 0.04%
1968-4 0.38% 0.26% 0.00% 0.09% 0.07% 0.79%
1972-4 -0.58% -0.95% 0.40% 0.03% -0.11% -1.22%
Avg -0.23% -0.34% -0.30% 0.06% 0.04% -0.70%
 
1976-4 -0.34% -0.34% 0.30% 1.05% 0.88% 1.55%
1980-4 0.10% 0.85% 1.68% -0.36% 0.66% 2.93%
1984-4 0.05% -0.72% -0.42% 0.32% -1.07% -1.85%
1988-4 -0.14% 0.36% 0.70% -0.44% 0.94% 1.43%
1992-4 1.36% -1.29% 0.04% 0.00% 0.71% 0.82%
Avg 0.21% -0.23% 0.46% 0.11% 0.42% 0.97%
 
1996-4 0.51% -0.15% -0.22% 0.23% 0.59% 0.95%
2000-4 -0.35% -0.49% 0.20% -0.27% -1.02% -1.93%
2004-4 0.17% 0.22% -0.71% 0.28% 0.45% 0.42%
2008-4 -4.71% 1.75% -4.71% 4.33% 4.03% 0.68%
2012-4 -0.31% -0.13% 0.12% -0.05% -0.01% -0.38%
Avg -0.94% 0.24% -1.06% 0.90% 0.81% -0.05%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.32% -0.11% -0.30% 0.36% 0.42% 0.07%
Win% 40% 40% 57% 60% 60% 60%
 
SPX summary for all years 1953 - 2015
Avg 0.07% 0.15% 0.10% 0.16% 0.15% 0.61%
Win% 51% 56% 65% 56% 57% 62%


Conclusion

Friday's market action will probably shut down any talk of a September rate hike by the FED. If the typical non confirmation patterns are followed there should be, at least, one more new high in the blue chip indices before a significant decline gets under way. I am not suggesting a high likelihood of a significant decline. Just saying if it comes, it did not begin last week.

I expect the major averages to be higher on Friday September 16 than they were on Friday September 9.

Last week's positive forecast was a miss.

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

Good Luck,

YTD W 14 / L 15 / T 7

 

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