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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 25, 2017

The good news is:
• The S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) closed at all time highs last Friday.


The Negatives

The secondaries continue to under perform the blue chips.

Of the major indices only the Russell 2000 (R2K) was down last week.


The Positives

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 continued its rise, but fell a little on Friday.

OTC and OTC NH

The next chart is similar to the one above except it shows the 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 fell last week, but, finished the week at 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 fell, finishing the week at a very strong 89%.

SPX and NY HL Ratio


Seasonality

Next week includes the last 2 trading days of February and the first 3 trading days of March 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 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns for the coming week have been mixed, but mostly positive.

Report for the last 2 days of February and first 3 days of March.
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 1
  Day2 Day1 Day1 Day2 Day3 Totals
1965-1 0.54% 4 -0.15% 5 0.25% 1 -0.23% 2 -0.12% 3 0.29%
1969-1 0.53% 4 -0.82% 5 -0.13% 1 -0.16% 2 0.40% 3 -0.19%
1973-1 -1.21% 2 0.51% 3 -0.73% 4 0.49% 5 0.37% 1 -0.58%
 
1977-1 0.06% 5 -0.35% 1 0.60% 2 0.05% 3 0.36% 4 0.73%
1981-1 1.10% 4 0.96% 5 0.53% 1 -0.36% 2 0.20% 3 2.44%
1985-1 -0.31% 3 0.02% 4 1.05% 5 -0.03% 1 0.01% 2 0.74%
1989-1 -0.26% 1 0.19% 2 0.02% 3 0.68% 4 0.36% 5 1.01%
1993-1 0.70% 4 0.55% 5 -0.19% 1 1.23% 2 0.91% 3 3.20%
Avg 0.26% 0.28% 0.40% 0.31% 0.37% 1.62%
 
1997-1 -2.08% 4 -0.28% 5 0.17% 1 0.40% 2 0.96% 3 -0.83%
2001-1 -4.36% 2 -2.54% 3 1.47% 4 -3.01% 5 1.19% 1 -7.25%
2005-1 0.67% 5 -0.66% 1 0.95% 2 -0.18% 3 -0.44% 4 0.34%
2009-1 -2.38% 4 -0.98% 5 -3.99% 1 -0.14% 2 2.48% 3 -5.01%
2013-1 1.04% 3 -0.07% 4 0.30% 5 0.39% 1 1.32% 2 2.99%
Avg -1.42% -0.91% -0.22% -0.51% 1.10% -1.95%
 
OTC summary for Presidential Year 1 1965 - 2013
Averages -0.46% -0.28% 0.02% -0.07% 0.62% -0.16%
% Winners 54% 38% 69% 46% 85% 62%
MDD 3/2/2001 8.27% -- 3/3/2009 7.33% -- 2/28/1997 2.36%
 
OTC summary for all years 1963 - 2016
Averages -0.07% -0.12% 0.24% 0.03% 0.33% 0.42%
% Winners 61% 46% 64% 52% 69% 61%
MDD 3/2/2001 8.27% -- 3/3/2009 7.33% -- 3/5/2007 6.54%
 
SPX Presidential Year 1
  Day2 Day1 Day1 Day2 Day3 Totals
1929-1 1.20% 3 1.35% 4 0.94% 5 -0.23% 6 -1.09% 1 2.17%
1933-1 -1.07% 1 2.35% 2 1.94% 3 -2.08% 4 3.36% 5 4.50%
 
1937-1 0.33% 5 0.17% 6 0.00% 1 1.38% 2 1.15% 3 3.03%
1941-1 -0.70% 4 0.40% 5 -0.20% 6 -1.31% 1 0.51% 2 -1.30%
1945-1 0.78% 2 0.70% 3 0.14% 4 -0.63% 5 0.00% 6 1.00%
1949-1 0.49% 6 1.18% 1 0.62% 2 -0.27% 3 -0.14% 4 1.87%
1953-1 0.15% 4 -0.19% 5 0.12% 1 0.27% 2 -0.85% 3 -0.50%
Avg 0.21% 0.45% 0.13% -0.11% 0.13% 0.82%
 
1957-1 -0.09% 3 -0.35% 4 1.11% 5 0.73% 1 0.36% 2 1.77%
1961-1 0.73% 1 0.22% 2 -0.02% 3 0.66% 4 0.16% 5 1.76%
1965-1 0.03% 4 0.26% 5 -0.21% 1 0.17% 2 -0.16% 3 0.10%
1969-1 -0.31% 4 -0.01% 5 0.25% 1 0.96% 2 0.39% 3 1.28%
1973-1 -1.15% 2 0.70% 3 -0.56% 4 1.11% 5 0.36% 1 0.45%
Avg -0.16% 0.17% 0.12% 0.73% 0.22% 1.07%
 
1977-1 -0.12% 5 0.34% 1 0.84% 2 -0.27% 3 0.49% 4 1.28%
1981-1 1.23% 4 0.90% 5 0.56% 1 -1.10% 2 0.23% 3 1.82%
1985-1 -0.25% 3 0.26% 4 1.13% 5 -0.64% 1 0.09% 2 0.59%
1989-1 0.24% 1 0.36% 2 -0.61% 3 0.99% 4 0.42% 5 1.41%
1993-1 0.33% 4 0.24% 5 -0.31% 1 1.33% 2 0.30% 3 1.90%
Avg 0.29% 0.42% 0.32% 0.06% 0.31% 1.40%
 
1997-1 -1.32% 4 -0.54% 5 0.57% 1 -0.55% 2 1.40% 3 -0.44%
2001-1 -0.77% 2 -1.43% 3 0.10% 4 -0.57% 5 0.59% 1 -2.08%
2005-1 0.93% 5 -0.64% 1 0.57% 2 -0.03% 3 0.03% 4 0.86%
2009-1 -1.58% 4 -2.36% 5 -4.66% 1 -0.64% 2 2.38% 3 -6.86%
2013-1 1.27% 3 -0.09% 4 0.23% 5 0.46% 1 0.96% 2 2.84%
Avg -0.29% -1.01% -0.64% -0.27% 1.07% -1.14%
 
SPX summary for Presidential Year 1 1929 - 2013
Averages 0.02% 0.17% 0.12% -0.01% 0.50% 0.79%
% Winners 55% 64% 64% 45% 77% 77%
MDD 3/3/2009 8.96% -- 3/2/2001 2.64% -- 3/2/1933 2.08%
 
SPX summary for all years 1928 - 2016
Averages -0.01% 0.04% 0.18% 0.17% 0.23% 0.58%
% Winners 55% 56% 64% 56% 63% 69%
MDD 3/3/2009 8.96% -- 3/4/1931 4.57% -- 3/2/2007 4.29%


March

Since 1963, over all years, the OTC in March has been up 63% of the time with an average gain of 0.9%. During the 1st year of the Presidential Cycle March the OTC has been up 54% of the time with an average loss of -0.2%. The best March ever for the OTC was 2009 (+10.9%), the worst, 1980 (-17.1%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change 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.

The blue line shows the average of all years since 1963 while the green line shows the average during the 1st year of the Presidential Cycle.

OTC March, All Year 1 1963-2017

Since 1928 the SPX has been up 62% of the time in March with an average gain of 0.6%. During the 1st year of the Presidential Cycle the SPX has been up 50% of the time with an average gain of 0.5%. The best March ever for the SPX was 1928 (+10.8%) the worst 1938 (-25.0%).

The chart below is similar to the one above except it shows the daily performance over all years of the SPX in March in red and the performance during the 1st year of the Presidential Cycle in green.

SPX March, All Year 1 1928-2017

Since 1979 the R2K been up 74% of the time in March with an average gain of 1.5%. During the 1st year of the Presidential Cycle the R2K has been up 56% of the time with an average gain off 1.2%. The best March ever for the R2K 1979 (+9.7%), the worst 1980 (-18.5%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in February in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.

Rusell 2000 Year 1 1979-2017

Since 1885 the DJIA, in March, has been up 60% of the time with an average gain of 0.7%. During the 1st year of the Presidential Cycle the DJIA has been up 55% of the time in March with an average gain of 0.5%. The best March ever for the DJIA 1920 (+12.6%), the worst 1938 (-23.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in February in grey and the average performance during the 1st year of the Presidential Cycle in green.

Dow Jones Industrial Average March, All Year 1 1885-2017


Conclusion

The breadth indicators deteriorated a bit last week and the secondaries were weaker than the blue chips. Seasonality turns modestly positive next week and is strong for the first half of March. However the market has not been following the seasonal pattern.

I expect the major averages to be higher on Friday March 3 than they were on Friday February 24.

Last week the R2K was down while all of the other major indices were up 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 3 / T 3

 

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