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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…

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Technical Market Report for February 4, 2017

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


The Negatives

New highs continued 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 declined while the index rose to a new high.

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.

The pattern is similar to the chart above.

SPX and NY NH


The Positives

New highs continued to outnumber new lows by strong margins.

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 declined a little from last week, but finished the week at a very strong 79%.

OTC and OTC HL Ratio

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

NY HL Ratio also declined a little from the previous week, but, finished the week at a very strong 88%.

SPX and NY HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of February during the 1st 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 2016 while SPX data runs from 1953 to 2016. 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 mixed over all years, but very negative during the 1st year of the Presidential Cycle.

Report for the week before the 2nd Friday of February
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 -0.33% -0.25% 0.53% -1.38% -0.59% -2.03%
1969-1 0.00% 0.25% -0.23% 0.32% 0.00% 0.34%
1973-1 -0.36% -0.38% 0.21% -1.01% -0.82% -2.36%
 
1977-1 -0.13% -0.02% -0.62% 0.31% -0.21% -0.67%
1981-1 -0.48% -0.12% -0.45% -0.61% -0.37% -2.03%
1985-1 0.84% 0.69% 0.62% 0.96% 0.40% 3.51%
1989-1 -0.09% 0.79% -0.30% -0.39% -0.99% -0.98%
1993-1 -0.36% -0.89% 0.41% 0.12% -0.77% -1.49%
Avg -0.04% 0.09% -0.07% 0.08% -0.39% -0.33%
 
1997-1 -1.65% -0.29% 2.07% 0.86% -0.26% 0.74%
2001-1 -0.65% 0.81% -2.13% -1.75% -3.56% -7.28%
2005-1 -0.22% 0.22% -1.64% 0.03% 1.15% -0.46%
2009-1 -0.01% -4.20% 0.38% 0.73% -0.48% -3.57%
2013-1 -1.51% 1.29% -0.10% -0.11% 0.91% 0.49%
Avg -0.81% -0.43% -0.28% -0.05% -0.45% -2.02%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg -0.41% -0.16% -0.10% -0.15% -0.46% -1.21%
Win% 08% 46% 46% 54% 25% 31%
 
OTC summary for all years 1963 - 2016
Avg -0.14% -0.02% 0.09% 0.27% 0.01% 0.21%
Win% 38% 56% 57% 69% 58% 57%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.46% -0.27% 0.08% 0.00% 0.39% -0.27%
 
1957-1 -0.20% -1.44% -0.16% -0.46% -0.69% -2.94%
1961-1 -0.74% -0.18% 0.91% -0.31% -0.84% -1.15%
1965-1 -0.39% 0.33% -0.89% -1.06% 0.74% -1.28%
1969-1 0.00% 0.12% -0.98% 1.05% -0.10% 0.09%
1973-1 -0.10% 0.19% -0.69% -0.44% 1.34% 0.30%
Avg -0.36% -0.19% -0.36% -0.24% 0.09% -1.00%
 
1977-1 0.01% -0.28% -0.86% 0.09% -0.60% -1.64%
1981-1 -1.02% -0.02% -0.77% -0.59% -0.39% -2.80%
1985-1 0.96% 0.14% -0.10% 0.77% 0.20% 1.98%
1989-1 -0.31% 1.21% -0.33% -0.87% -1.36% -1.66%
1993-1 -0.24% -0.56% 0.20% 0.32% -0.69% -0.97%
Avg -0.12% 0.10% -0.37% -0.06% -0.57% -1.02%
 
1997-1 -0.52% 0.53% 1.67% 1.13% -0.41% 2.39%
2001-1 0.36% -0.15% -0.84% -0.62% -1.33% -2.59%
2005-1 -0.11% 0.05% -0.86% 0.42% 0.69% 0.20%
2009-1 0.15% -4.91% 0.80% 0.17% -1.00% -4.79%
2013-1 -1.15% 1.04% 0.05% -0.18% 0.57% 0.33%
Avg -0.26% -0.69% 0.16% 0.18% -0.30% -0.89%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg -0.25% -0.26% -0.17% -0.04% -0.22% -0.93%
Win% 27% 50% 38% 47% 38% 38%
 
SPX summary for all years 1953 - 2016
Avg -0.26% -0.08% 0.12% 0.01% 0.06% -0.14%
Win% 37% 50% 58% 44% 52% 56%


Conclusion

The breadth indicators did ok last week and the secondaries outperformed the blue chips. However, Seasonality for the next few weeks is very negative.

I expect the major averages to be lower on Friday February 10 than they were on Friday February 3.

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

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

Good Luck,

YTD W 2 / L 1 / T 2

 

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