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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

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Technical Market Report for November 12, 2016

The good news is:
• The market likes Donald J. Trump.


The Negatives

Some of the breadth indicators went from oversold to overbought in 1 week.

Equities had a great week, fixed income, not so much. Corporate bonds and treasuries had their worst week in a long time.

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 lows (NY NL) in blue. Dashed vertical lines have been drawn on the 1st trading day of each month. NY NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward. Up is good.

The current value of the indicator is 85. The NYSE new low list is populated, almost exclusively with fixed income issues.

SPX and NY NL Chart

The next chart is similar to the first one except it shows the NASDAQ composite (OTC) in blue and OTC NL, in orange has been calculated with NASDAQ data.

This chart could be considered a positive because the indicator has turned upward. However, the new low numbers are still pretty large. For a long time I have considered NASDAQ new low numbers greater than 70 to be threatening. Last Friday was the 1st time since October 24 there were less than 70 new lows on the NASDAQ (55).

OTC and OTC NL Chart

The Hindenburg Omen triggers when NYSE new highs and new lows both exceed 2.3% of issues traded and the NYSE composite is above its 20 week moving average. Those criteria were met on each of the last 3 trading days of last week. The omen has not done well recently, probably because of the high number of fixed income issues traded on the NYSE and their performance divergence with equities.


The Positives

The level of new lows is still uncomfortably high. New highs, on the other hand expanded nicely. The NYSE had its highest number of new highs since early September. The NASDAQ had its highest number of new highs since October 18, 2013!

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.

This indicator went from 18% to 72% in a week, spectacular.

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.

SPX and NY HL Ratio Chart

NY HL Ratio made it into positive territory.

The Russell 2000 was up over 10% last week while most of the major indices were up 4% - 5%.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday 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 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 over all years, but negative during the 4th year of the Presidential Cycle.

Report for the week before the 3rd Friday of November.
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 0.27% 0.29% 0.27% 0.13% 0.04% 1.02%
1968-4 0.00% 0.27% 0.31% 0.13% 0.57% 1.29%
1972-4 -0.26% 0.10% -0.34% -0.14% 0.05% -0.59%
 
1976-4 0.03% 0.44% 0.55% 0.90% 0.18% 2.11%
1980-4 -0.08% 1.08% 0.62% 0.72% -0.21% 2.12%
1984-4 -0.10% -0.57% -0.35% -0.39% -0.36% -1.77%
1988-4 -0.37% -0.06% -1.17% -0.10% 0.04% -1.66%
1992-4 -0.49% -1.09% 1.24% 0.58% 0.63% 0.87%
Avg -0.20% -0.04% 0.18% 0.34% 0.06% 0.33%
 
1996-4 0.41% -0.49% 0.18% 0.93% -0.68% 0.35%
2000-4 -2.06% 5.78% 0.87% -4.22% -0.16% 0.22%
2004-4 0.42% -0.74% 1.01% 0.22% -1.60% -0.69%
2008-4 -2.29% 0.08% -6.53% -5.07% 5.18% -8.63%
2012-4 -0.02% -0.70% -1.29% -0.35% 0.57% -1.78%
Avg -0.71% 0.79% -1.15% -1.70% 0.66% -2.11%
 
OTC summary for Presidential Year 4 1964 - 2012
Avg -0.38% 0.34% -0.35% -0.51% 0.33% -0.55%
Win% 33% 54% 62% 54% 62% 54%
 
OTC summary for all years 1963 - 2015
Avg -0.11% 0.11% -0.06% 0.01% 0.05% 0.00%
Win% 46% 55% 57% 55% 57% 57%
 
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 0.32% -0.47% -0.56% -0.63% 0.04% -1.30%
1960-4 -0.50% 0.40% -0.20% -0.27% 0.49% -0.09%
1964-4 0.52% 0.44% 0.22% -0.05% 0.12% 1.25%
1968-4 0.00% 0.64% 0.49% 0.07% 0.55% 1.75%
1972-4 0.15% 0.92% -0.39% 0.55% 0.31% 1.54%
Avg 0.12% 0.39% -0.09% -0.07% 0.30% 0.63%
 
1976-4 0.67% 0.14% 0.57% 1.27% 0.03% 2.68%
1980-4 0.44% 1.42% -0.46% 0.96% -0.92% 1.44%
1984-4 -0.14% -0.83% 0.01% -0.06% -1.08% -2.10%
1988-4 -0.07% 0.23% -1.68% 0.30% 0.71% -0.53%
1992-4 -0.41% -0.34% 0.85% 0.18% 0.72% 1.00%
Avg 0.09% 0.12% -0.14% 0.53% -0.11% 0.50%
 
1996-4 0.15% -0.32% 0.21% 0.65% 0.24% 0.93%
2000-4 -1.08% 2.35% 0.50% -1.26% -0.34% 0.17%
2004-4 -0.03% -0.71% 0.55% 0.14% -1.12% -1.16%
2008-4 -2.58% 0.98% -6.12% -6.71% 6.32% -8.10%
2012-4 0.01% -0.40% -1.39% -0.16% 0.48% -1.45%
Avg -0.71% 0.38% -1.25% -1.47% 1.12% -1.92%
 
SPX summary for Presidential Year 4 1956 - 2012
Avg -0.18% 0.30% -0.49% -0.33% 0.44% -0.26%
Win% 50% 60% 53% 53% 73% 53%
 
SPX summary for all years 1953 - 2015
Avg 0.00% 0.00% -0.03% -0.07% 0.14% 0.05%
Win% 48% 46% 62% 49% 63% 54%


Conclusion

Donald J. Trump evaluates everything from an economic perspective and the market approves. For now the market is overbought and seasonality is negative.

I expect the major averages to be lower on Friday November 18 than they were on Friday November 11.

Last weeks negative forecast was a miss.

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

Good Luck,

YTD W 17 / L 19 / T 9

 

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