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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 18, 2017

The good news is:
• The breadth indicators improved significantly last week.


The Negatives

The breadth indicators improved last week, but, with the major indices only slightly off their all time highs, the breadth indicators are not confirming the index levels.

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 turned upward last week, but, while the index is only slightly off its all time high, OTC NH is far from confirming that 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

Last week new highs increased, new lows decreased and the secondaries outperformed the blue chips. If that pattern continues the bull will be revived.

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 finished the week at a comfortable 78%.

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 shot up to 80% on Friday.

SPX and NY HL Ratio


Seasonality

Next week includes the 5 trading days prior to the 4th 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 by most measures and a little stronger during the 1st year of the Presidential Cycle than average.

Report for the week before the 4th Friday of March.
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 0.02% -0.25% -0.10% 0.08% -0.14% -0.39%
1969-1 0.06% -0.10% -0.29% 0.15% 0.34% 0.16%
1973-1 -1.06% -0.57% -1.17% -1.85% -0.19% -4.83%
 
1977-1 -0.19% -0.22% -0.30% -0.23% -0.27% -1.21%
1981-1 0.64% 0.04% 0.78% 0.11% -0.34% 1.22%
1985-1 -0.30% 0.62% -0.03% 0.09% -0.04% 0.34%
1989-1 -0.09% 0.51% 0.27% 0.21% 0.54% 1.44%
1993-1 -0.89% -0.23% -0.10% 0.99% 0.08% -0.16%
Avg -0.17% 0.14% 0.12% 0.23% -0.01% 0.33%
 
1997-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2001-1 3.19% -4.81% -1.46% 3.69% 1.63% 2.24%
2005-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2009-1 6.76% -2.52% 0.82% 3.80% -2.63% 6.22%
2013-1 -0.35% -0.26% 0.78% -0.97% 0.70% -0.11%
Avg 3.20% -2.53% 0.04% 2.17% -0.10% 2.78%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg 0.71% -0.71% -0.07% 0.55% -0.03% 0.45%
Win% 45% 27% 36% 73% 45% 55%
 
OTC summary for all years 1965 - 2013
Avg 0.00% -0.20% 0.08% 0.17% 0.04% 0.09%
Win% 50% 41% 52% 54% 54% 57%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.61% 0.58% -0.27% -0.57% 0.15% -0.72%
 
1957-1 -0.45% 0.43% 0.14% 0.02% -0.11% 0.02%
1961-1 0.40% -0.19% -0.06% -0.26% -0.17% -0.28%
1965-1 -0.01% 0.12% 0.18% -0.29% -0.74% -0.74%
1969-1 -0.13% 0.16% 0.73% 0.71% 0.41% 1.88%
1973-1 -1.21% -0.20% -1.30% -1.49% 0.04% -4.16%
Avg -0.28% 0.07% -0.06% -0.26% -0.12% -0.66%
 
1977-1 -0.54% -0.31% -0.79% -0.50% -0.64% -2.78%
1981-1 1.20% -0.75% 1.81% -0.61% -1.19% 0.46%
1985-1 0.20% 1.50% -0.26% 0.15% -0.17% 1.42%
1989-1 0.55% 0.35% 0.26% 0.06% 0.80% 2.02%
1993-1 -0.29% -0.03% -0.15% 0.63% -0.69% -0.53%
Avg 0.22% 0.15% 0.17% -0.06% -0.38% 0.12%
 
1997-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2001-1 1.76% -2.41% -1.79% -0.41% 1.99% -0.85%
2005-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2009-1 7.08% -5.97% 5.18% 2.33% -2.03% 6.59%
2013-1 -0.55% -0.24% 0.67% -0.83% 0.72% -0.23%
Avg 2.76% -2.87% 1.35% 0.37% 0.23% 1.83%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg 0.53% -0.50% 0.31% -0.08% -0.12% 0.15%
Win% 43% 43% 50% 43% 43% 43%
 
SPX summary for all years 1953 - 2016
Avg 0.07% -0.12% 0.06% -0.02% -0.06% -0.08%
Win% 42% 45% 44% 40% 55% 38%


Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms. M2 growth continued to level off, but remains well above its elevated trend.

SPX and M2 Money Supply

Interest rates did not move much in the past month.

Yield Curve


Conclusion

The breadth indicators recovered a bit last week, but, with the major indices only slightly off their all time highs, there is little chance of new index highs being confirmed by anything.

I expect the major averages to be lower on Friday March 24 than they were on Friday March 17.

Last weeks positive forecast was a miss.

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

Good Luck,

YTD W 2 / L 5 / T 4

 

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