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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 17, 2017

The good news is:
• All of the major indices except the Russell 2000 closed at all time highs on Friday.


The Negatives

The negatives are fading.

New highs, which have been deteriorating for a while, picked up nicely last week and new lows remained dormant. The only negative remaining is the secondaries continued to lag behind the blue chips.


The Positive

The first chart covers the past 6 months showing the NASDAQ composite (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 has turned up nicely, but failed to confirm the index 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 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 rose to a very strong 89%.

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 rose, finishing the week at a very strong 94%.

SPX and NY HL ratio


Seasonality

Next week includes the 5 trading days prior to the 4th 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. The Presidents day holiday is observed on the 3rd Monday of February which usually falls ahead of the 4th Friday.

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 negative by all measures.

Report for the week before the 4th Friday of February.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.00% 0.61% 0.93% 0.54% -0.15% 1.94%
1969-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1973-1 0.00% 0.37% -0.85% -0.22% -1.08% -1.78%
 
1977-1 0.00% -0.25% -0.40% -0.96% 0.06% -1.54%
1981-1 0.40% 0.46% 0.03% 1.10% 0.96% 2.94%
1985-1 0.00% -0.28% 0.13% -0.10% -0.28% -0.54%
1989-1 0.00% -0.20% -0.96% 0.14% -0.77% -1.78%
1993-1 -1.69% -0.16% 1.70% 0.70% 0.55% 1.11%
Avg -0.64% -0.09% 0.10% 0.18% 0.10% 0.04%
 
1997-1 0.81% 0.19% -0.53% -2.08% -0.28% -1.89%
2001-1 0.00% -4.41% -2.14% -1.05% 0.78% -6.82%
2005-1 0.00% -1.37% 0.05% 1.01% 0.67% 0.35%
2009-1 -3.71% 3.90% -1.14% -2.38% -0.98% -4.31%
2013-1 0.00% 0.68% -1.53% -1.04% 0.97% -0.93%
Avg -1.45% -0.20% -1.06% -1.11% 0.23% -2.72%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg -1.05% -0.04% -0.39% -0.36% 0.04% -1.10%
Win% 50% 50% 42% 42% 50% 33%
 
OTC summary for all years 1963 - 2013
Avg -0.14% -0.30% 0.19% 0.07% 0.10% -0.02%
Win% 48% 38% 64% 64% 55% 59%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 0.00% 0.47% 0.62% 0.15% -0.19% 1.05%
 
1957-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1961-1 0.35% 0.06% 0.00% 0.37% 0.40% 1.19%
1965-1 0.00% 0.50% 0.61% 0.03% 0.26% 1.41%
1969-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1973-1 0.00% 0.37% -0.62% -0.22% -1.12% -1.59%
Avg 0.35% 0.31% 0.00% 0.06% -0.15% 0.34%
 
1977-1 0.00% 0.00% -0.30% -0.59% -0.12% -1.01%
1981-1 0.61% 0.03% 0.89% 1.23% 0.90% 3.66%
1985-1 0.00% -0.15% -0.08% -0.55% -0.46% -1.24%
1989-1 0.00% -0.26% -1.71% 0.39% -1.68% -3.27%
1993-1 0.23% -0.10% 1.40% 0.33% 0.24% 2.10%
Avg 0.42% -0.12% 0.04% 0.16% -0.23% 0.05%
 
1997-1 1.06% 0.21% -0.78% -1.32% -0.54% -1.35%
2001-1 0.00% -1.74% -1.85% -0.20% -0.56% -4.34%
2005-1 0.00% -1.45% 0.56% 0.79% 0.93% 0.83%
2009-1 -3.47% 4.01% -1.07% -1.58% -2.36% -4.46%
2013-1 0.00% 0.73% -1.24% -0.63% 0.88% -0.26%
Avg -1.20% 0.35% -0.88% -0.59% -0.33% -1.92%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg -0.24% 0.21% -0.27% -0.13% -0.24% -0.52%
Win% 80% 62% 38% 50% 43% 43%
 
SPX summary for all years 1953 - 2013
Avg -0.15% -0.18% 0.15% -0.06% 0.09% -0.06%
Win% 39% 42% 52% 47% 60% 47%


Conclusion

The breadth indicators were strong last week. The secondaries continued to under perform the blue chips. Seasonality for the next week remains negative. The market has not been following the seasonal pattern recently.

I expect the major averages to be higher on Friday February 24 than they were on Friday February 17.

Last weeks negative forecast was a miss.

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

Good Luck,

YTD W 2 / L 3 / T 2

 

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