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Technical Market Report for January 14, 2017

The good news is:
• The NASDAQ composite (OTC) closed at an all time high last Friday.


The Negatives

More of the same, new highs continue to deteriorate.

The chart below covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st. trading day of each month.

OTC NH continued falling in spite of a strong week for the index.

OTC and OTC NH

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.

NY NH resumed its fall last week.

SPX and NY NH


The Positives

While new highs have been collapsing, new lows have remained at non threatening 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 held above 80% finishing the week at a very strong 84%.

OTC and OTC HL Ratio

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

NY HL Ratio declined a little to 88% last week, still, very strong.

SPX and NY HL Ratio


Seasonality

The market is closed next Monday in observance of the Martin Luther King holiday. Trading next week includes the 4 trading days prior to the 3rd Friday of January during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period. Monday in the years when the MLK holiday fell on that day show a return of 0.00%.

OTC data covers the period from 1963 to 2015 while SPX data runs from 1953 to 2015. There are summaries for both the 1st 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 modest and better for small caps than large caps.

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

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.26% 0.20% 0.09% 0.09% 0.07% 0.70%
1969-1 -0.76% -0.74% -0.16% 0.65% 1.11% 0.10%
1973-1 -0.61% -1.04% -0.42% 0.03% -0.15% -2.19%
 
1977-1 -0.06% -0.01% 0.43% -0.48% 0.25% 0.13%
1981-1 0.39% -0.20% 0.52% 0.39% 0.64% 1.75%
1985-1 1.28% 0.93% 0.95% 0.35% 0.72% 4.25%
1989-1 0.07% -0.34% 0.73% 0.57% 0.15% 1.18%
1993-1 0.14% -0.19% 0.09% 0.48% 0.12% 0.64%
Avg 0.37% 0.04% 0.55% 0.26% 0.38% 1.59%
 
1997-1 -0.08% 1.11% -0.89% 0.51% 0.64% 1.29%
2001-1 0.00% -0.30% 2.45% 3.19% 0.07% 5.41%
2005-1 0.00% 0.87% -1.54% -1.34% -0.57% -2.58%
2009-1 -2.09% 0.50% -3.67% 1.49% 1.16% -2.62%
2013-1 -0.26% -0.22% 0.22% 0.59% -0.04% 0.29%
Avg -0.81% 0.39% -0.69% 0.89% 0.25% 0.36%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg -0.15% 0.04% -0.09% 0.50% 0.32% 0.64%
Win% 45% 38% 62% 85% 77% 77%
 
OTC summary for all years 1963 - 2016
Avg -0.03% 0.24% 0.03% 0.21% 0.05% 0.52%
Win% 58% 59% 57% 67% 57% 69%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.84% 0.62% 0.23% 0.19% -0.42% -0.22%
 
1957-1 -0.69% -1.48% 0.11% -0.02% -1.28% -3.37%
1961-1 -0.03% -0.40% 0.57% 0.15% 0.32% 0.61%
1965-1 0.32% 0.16% -0.03% -0.09% 0.25% 0.61%
1969-1 -0.53% 0.73% 0.48% 0.55% -0.15% 1.09%
1973-1 -0.72% -0.25% 0.46% 0.14% -0.06% -0.43%
Avg -0.33% -0.25% 0.32% 0.15% -0.18% -0.30%
 
1977-1 -0.27% -0.40% 0.51% -0.85% 0.34% -0.66%
1981-1 0.03% -0.17% 0.14% 0.64% 0.34% 0.96%
1985-1 1.55% 0.18% 0.22% -0.27% 0.35% 2.02%
1989-1 0.10% -0.21% 1.05% 0.13% -0.09% 0.97%
1993-1 -0.07% -0.39% -0.40% 0.49% 0.14% -0.24%
Avg 0.27% -0.20% 0.30% 0.03% 0.21% 0.61%
 
1997-1 0.00% 1.23% -0.22% 0.33% 0.83% 2.18%
2001-1 0.00% 0.63% 0.21% 1.39% -0.40% 1.83%
2005-1 0.00% 0.97% -0.95% -0.78% -0.64% -1.40%
2009-1 -2.26% 0.18% -3.35% 0.13% 0.76% -4.54%
2013-1 -0.09% 0.11% 0.02% 0.56% 0.34% 0.94%
Avg -0.78% 0.62% -0.86% 0.33% 0.18% -0.20%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg -0.25% 0.09% -0.06% 0.17% 0.04% 0.02%
Win% 36% 56% 69% 69% 56% 56%
 
SPX summary for all years 1953 - 2016
Avg -0.09% 0.12% -0.07% 0.05% -0.06% -0.04%
Win% 43% 61% 53% 59% 55% 50%


Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms. M2 growth resumed at its elevated trend last month.

S&P500 and M2 Money Supply

Interest rates are still in their moon shot as the yield curve continues to fall.

Yield Curve


Conclusion

Not much changed last week. Except for new highs, the breadth indicators are comfortably positive and Seasonality suggests continued modest gains.

I expect the major averages to be higher on Friday January 20 than they were on Friday January 13.

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

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

Good Luck,

YTD W 1 / L 0 / T 1

 

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