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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 March 11, 2017

The good news is:

• The market appears to be setting up for a fall which should create some buying opportunities.


The Negatives

The breadth indicators deteriorated badly last week and the secondaries continued to under perform the blue chips.

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 fell last week.

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 also dropped.

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 sharply, but finished the week at a modestly positive 64%.

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 crashed to a negative 45%.

SPX and NY HL Ratio

The next chart covers the past 6 months showing the OTC in blue and an Advance - Decline line (ADL) calculated from NASDAQ data. ADL's are a running total of declining issues subtracted from advancing issues.

I included these next 2 charts because there was a rare, sharp break to the downside last week.

OTC and OTC ADL

The next chart is similar to the one above except is shows the SPX in red and the NYSE ADL has been calculated from NYSE data.

There was a similar sharp break to the downside in the NYSE ADL.

SPX and NY ADL


The Positives

On the NASDAQ new highs outnumbered new lows every day last week.


Seasonality

Next week includes the 5 trading days prior to the 3rd Friday 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 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 modestly positive over all years and modestly negative during the 1st year of the Presidential Cycle (helped by big losses in 2001).

Report for the week before the 3rd Friday of March.
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 0.62% 0.08% 0.14% 0.04% -0.27% 0.62%
1969-1 -0.44% -0.22% 0.01% 0.47% 0.60% 0.43%
1973-1 -0.11% 0.19% 0.01% 0.41% -1.13% -0.63%
 
1977-1 0.12% 0.21% 0.20% -0.17% 0.02% 0.39%
1981-1 0.63% -0.12% 0.40% 0.22% 0.90% 2.02%
1985-1 -0.41% 0.08% -1.14% -0.27% 0.18% -1.56%
1989-1 0.16% -0.14% 0.24% 0.62% -1.79% -0.90%
1993-1 0.35% 0.04% -1.16% 0.00% -0.68% -1.45%
Avg 0.17% 0.01% -0.29% 0.08% -0.27% -0.30%
 
1997-1 -1.05% -0.75% -1.60% 0.78% -0.41% -3.03%
2001-1 -6.30% 4.75% -2.12% -1.59% -2.57% -7.83%
2005-1 0.46% -0.78% -0.94% 0.03% -0.43% -1.66%
2009-1 -1.92% 4.14% 1.99% -0.52% -1.77% 1.92%
2013-1 0.26% -0.32% 0.09% 0.43% -0.30% 0.15%
Avg -1.71% 1.41% -0.52% -0.17% -1.10% -2.09%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg -0.59% 0.55% -0.30% 0.04% -0.59% -0.89%
Win% 54% 54% 62% 69% 31% 46%
 
OTC summary for all years 1963 - 2016
Avg -0.14% 0.09% 0.02% 0.18% -0.10% 0.05%
Win% 52% 56% 65% 74% 50% 59%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 0.15% 0.42% -0.34% -0.08% -0.15% 0.00%
 
1957-1 -0.66% -0.07% 0.66% 0.07% -0.05% -0.04%
1961-1 0.28% -0.44% 0.30% 1.01% 0.61% 1.76%
1965-1 0.03% -0.13% -0.13% -0.24% 0.03% -0.42%
1969-1 0.26% 0.24% 0.73% 0.64% -0.21% 1.66%
1973-1 0.06% 0.54% 0.44% -0.75% -0.51% -0.21%
Avg 0.00% 0.03% 0.40% 0.14% -0.02% 0.55%
 
1977-1 0.77% 0.55% 0.19% -0.09% -0.22% 1.20%
1981-1 1.18% -0.56% 0.22% -0.57% 0.46% 0.74%
1985-1 -0.17% 0.49% -0.82% -0.20% -0.74% -1.44%
1989-1 0.83% -0.06% 0.52% 0.93% -2.25% -0.03%
1993-1 0.36% -0.01% -0.68% 0.80% -0.38% 0.08%
Avg 0.59% 0.08% -0.11% 0.18% -0.62% 0.11%
 
1997-1 0.32% -0.76% -0.49% -0.40% 0.19% -1.14%
2001-1 -4.32% 1.48% -2.58% 0.59% -1.96% -6.79%
2005-1 0.56% -0.75% -0.81% 0.18% -0.05% -0.87%
2009-1 -0.35% 3.21% 2.09% -1.30% -1.98% 1.67%
2013-1 0.32% -0.24% 0.13% 0.56% -0.16% 0.61%
Avg -0.69% 0.59% -0.33% -0.07% -0.79% -1.30%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg -0.02% 0.24% -0.04% 0.07% -0.46% -0.20%
Win% 75% 44% 56% 50% 25% 50%
 
SPX summary for all years 1953 - 2016
Avg 0.05% 0.20% 0.14% 0.21% 0.02% 0.61%
Win% 63% 56% 59% 59% 58% 64%


Conclusion

The breadth indicators deteriorated badly last week and seasonality is negative next week.

I expect the major averages to be lower on Friday March 17 than they were on Friday March 10.

Last weeks positive forecast was a miss.

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

Good Luck,

YTD W 2 / L 4 / T 4

 

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