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Technical Market Report for October 29, 2016

The good news is:
• Seasonality for the coming week has been very strong.


The Negatives

Last week the market followed the average seasonal pattern and fell.

Everything was weak. New lows reached dangerous levels and the secondaries underperformed the blue chips.

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.

New highs declined slightly to their lowest level in over 6 months.

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.

OTC NH has fallen sharply in the past 2 months, but held up pretty well last week considering the sharp decline of the index.

OTC and OTC NH Chart

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 resumed its decline last week.

OTC and OTC HL Ratio Chart


The Positives

The market is a bit oversold and Seasonality for at least the early part of next week is very strong.

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 neutral.

SPX and NY HL Ratio Chart


Seasonality

Next week includes the last trading day of October and the first 4 trading days of November 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.

Average returns for the coming week have been positive by all measures.

Report for the last day of October and the first 4 days of November.
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 0.14% 5 0.14% 1 0.14% 3 -0.21% 4 0.00% 5 0.21%
1968-4 -0.68% 4 -0.10% 5 -0.68% 1 -0.54% 3 0.06% 4 -1.95%
1972-4 0.60% 2 1.04% 3 0.40% 4 0.92% 5 0.18% 1 3.15%
 
1976-4 0.56% 5 0.64% 1 -1.70% 3 0.76% 4 -0.66% 5 -0.40%
1980-4 0.14% 5 0.19% 1 1.49% 3 -1.06% 4 -0.23% 5 0.54%
1984-4 -0.17% 3 0.38% 4 -0.02% 5 0.20% 1 0.86% 2 1.25%
1988-4 -0.09% 1 -0.03% 2 -0.15% 3 0.26% 4 -0.46% 5 -0.46%
1992-4 -0.11% 5 0.40% 1 -0.49% 2 0.16% 3 1.41% 4 1.37%
Avg 0.07% 0.32% -0.17% 0.06% 0.19% 0.46%
 
1996-4 1.27% 4 0.02% 5 -0.11% 1 0.70% 2 1.37% 3 3.26%
2000-4 5.58% 2 -1.07% 3 2.87% 4 0.66% 5 -1.03% 1 7.01%
2004-4 -0.04% 5 0.25% 1 0.25% 2 0.98% 3 0.96% 4 2.41%
2008-4 1.32% 5 0.31% 1 3.12% 2 -5.53% 3 -4.34% 4 -5.12%
2012-4 -0.36% 3 1.44% 4 -1.26% 5 0.59% 1 0.41% 2 0.82%
Avg 1.56% 0.19% 0.97% -0.52% -0.52% 1.67%
 
OTC summary for Presidential Year 4 1964 - 2012
Averages 0.63% 0.28% 0.30% -0.16% -0.11% 0.93%
% Winners 54% 77% 46% 69% 54% 69%
MDD 11/6/2008 9.63% -- 11/6/1968 1.99% -- 11/3/1976 1.70%
 
OTC summary for all years 1963 - 2015
Averages 0.43% 0.27% 0.24% 0.26% 0.17% 1.36%
% Winners 66% 66% 55% 66% 59% 72%
MDD 11/6/2008 9.63% -- 11/1/2011 4.76% -- 11/6/1973 3.92%
 
SPX Presidential Year 4
  Day1 Day1 Day2 Day3 Day4 Totals
1928-4 -0.37% 3 1.43% 4 -0.18% 5 0.09% 6 1.23% 1 2.20%
1932-4 -0.57% 1 -2.87% 2 -3.55% 3 -0.61% 4 6.17% 5 -1.44%
 
1936-4 -0.12% 6 -0.23% 1 1.51% 3 0.75% 4 -0.74% 5 1.17%
1940-4 1.47% 4 0.00% 5 0.36% 6 0.36% 1 -3.32% 3 -1.13%
1944-4 0.16% 2 0.39% 3 0.55% 4 -0.08% 5 0.23% 6 1.25%
1948-4 0.24% 6 0.97% 1 -4.61% 3 1.32% 4 -4.40% 5 -6.48%
1952-4 1.53% 5 0.33% 1 0.28% 3 0.41% 4 0.04% 5 2.59%
Avg 0.66% 0.29% -0.38% 0.55% -1.64% -0.52%
 
1956-4 -1.70% 3 2.06% 4 0.99% 5 1.32% 1 -1.03% 3 1.64%
1960-4 -0.04% 1 1.03% 2 0.52% 3 0.39% 4 0.86% 5 2.76%
1964-4 0.15% 5 0.38% 1 -0.05% 3 0.02% 4 0.08% 5 0.59%
1968-4 0.11% 4 -0.34% 5 0.04% 1 0.16% 3 0.22% 4 0.19%
1972-4 0.90% 2 0.98% 3 0.50% 4 0.87% 5 -0.21% 1 3.03%
Avg -0.12% 0.82% 0.40% 0.55% -0.01% 1.64%
 
1976-4 1.27% 5 0.19% 1 -1.14% 3 0.48% 4 -1.55% 5 -0.75%
1980-4 0.93% 5 1.23% 1 1.77% 3 -1.84% 4 0.21% 5 2.31%
1984-4 -0.45% 3 0.84% 4 -0.04% 5 0.69% 1 1.09% 2 2.13%
1988-4 0.16% 1 0.03% 2 0.00% 3 0.05% 4 -1.04% 5 -0.79%
1992-4 -0.52% 5 0.97% 1 -0.67% 2 -0.67% 3 0.29% 4 -0.59%
Avg 0.28% 0.65% -0.02% -0.26% -0.20% 0.46%
 
1996-4 0.62% 4 -0.21% 5 0.42% 1 1.05% 2 1.46% 3 3.34%
2000-4 2.20% 2 -0.57% 3 0.50% 4 -0.11% 5 0.39% 1 2.40%
2004-4 0.24% 5 0.03% 1 0.00% 2 1.12% 3 1.62% 4 3.01%
2008-4 1.54% 5 -0.25% 1 4.08% 2 -5.27% 3 -5.03% 4 -4.93%
2012-4 0.03% 3 1.09% 4 -0.94% 5 0.22% 1 0.79% 2 1.17%
Avg 0.93% 0.01% 0.81% -0.60% -0.16% 1.00%
 
SPX summary for Presidential Year 4 1928 - 2012
Averages 0.35% 0.34% 0.02% 0.03% -0.12% 0.62%
% Winners 68% 68% 59% 73% 64% 68%
MDD 11/6/2008 10.03% -- 11/5/1948 7.60% -- 11/3/1932 7.43%
 
SPX summary for all years 1928 - 2015
Averages 0.21% 0.23% -0.01% 0.27% 0.05% 0.75%
% Winners 57% 63% 57% 66% 53% 70%
MDD 11/6/1929 14.66% -- 11/6/2008 10.03% -- 11/5/1948 7.60%


November

Since 1963, over all years, the OTC in November has been up 70% of the time with an average gain of 1.6%. During the 4th year of the Presidential Cycle November has been up 69% time with an average loss of -0.2% (helped considerably by losses of 22.9% in 2000 and 10.8% in 2008). The best November ever for the OTC was 1999 (+12.5%), the worst 2000 (-22.9%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in November over all years since 1963 while the black line shows the average during the 4th year of the Presidential Cycle over the same period.

OTC November, All, Year 4 1963-2016

Since 1928 the SPX has been up 59% of the time in November with an average gain of 0.6%. During the 4th year of the Presidential Cycle the SPX has been up 55% of the time with an average gain of 0.6%. The best November ever for the SPX was 1928 (+12.0%), the worst 1929 (-13.4%).

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in November in red and the performance during the 4th year of the Presidential Cycle in black.

SPX November, All, Year 4 1928-2016

Since 1979 the Russell 2000 (R2K) has been up 65% of the time in November with an average gain of 1.8%. During the 4th year of the Presidential Cycle the R2K has been up 56% of the time with an average loss of -0.2% (helped by a 10.4% loss in 2000 and a 12.0% loss in 2008). The best November ever for the R2K, 1982 (+8.8%), the worst 2008 (-12.0%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in November in magenta and the performance during the 4th year of the Presidential Cycle in black.

Russell 2000 November, All, Year 4 1979-2016

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 59% of the time in November with an average gain of 0.8%. During the 4th year of the Presidential Cycle the DJIA has been up 59% of the time in November with an average gain of 1.6%. The best November ever for the DJIA, 1928 (+16.3%), the worst 1973 (-14.0%).

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in November in grey and the performance during the 4th year of the Presidential Cycle in black.

Dow Industrials November, All, Year 4 1885-2016


Conclusion

The market has been doing a reasonably good job of following the average seasonal pattern and the first part of next week is very strong.

I expect the major averages to be higher on Friday November 4 than they were on Friday October 28.

Last week the Dow Jones Industrial Average was up slightly while the rest of the major indices were down. I am calling last weeks negative forecast a tie.

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

Good Luck,

YTD W 17 / L 17 / T 9

 

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