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Technical Market Report for May 6, 2017

The good news is:
• Both the NASDAQ composite (OTC) and the S&P 500 (SPX) closed at all time highs last Friday.


The Negatives

New lows reached threatening levels for several days last week and the secondaries underperformed the blue chips.

On the NYSE, I consider more than 40 new lows to be threatening and that level was exceeded on both Wednesday and Thursday. On Wednesday there were 95 new lows and 143 new highs which, along with a rising 20 week moving average of the NYSE composite, triggered a Hindenburg omen.

The proliferation of interest rate sensitive issues along with the Feds manipulation of interest rates has contaminated that data and degraded the reliability of the Hindenburg omen in recent years.

For decades I have considered 70 as the cautionary threshold for NASDAQ new lows and that number was exceeded on the last 3 days of last week. NASDAQ data has not been contaminated with interest rate sensitive issues.

The first chart 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 not only failed to confirm the index high, but declined a bit while the index was climbing to a new high.

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 Positives

New highs easily outnumbered new lows all week.

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 finishing the week at 69%.

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, but finished the week at a strong 78%.

SPX and NY HL Ratio


Seasonality

Next week includes the first 5 trading days prior to the 2nd Friday of May 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, but stronger during the 1st year of the Presidential Cycle than average.

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

OTC Presidential Year 1
YearMonTueWedThurFriTotals
1965-1-0.12%-0.25%-0.46%0.72%-0.60%-0.71%
1969-10.34%0.19%-0.38%-0.02%0.32%0.45%
1973-1-0.37%0.17%-0.12%-0.20%-1.11%-1.62%
 
1977-1-0.14%0.41%-0.25%0.04%0.46%0.53%
1981-1-1.55%-0.83%0.20%0.79%0.55%-0.83%
1985-1-0.16%0.37%0.06%0.78%1.48%2.53%
1989-1-0.33%-0.08%0.16%0.23%0.98%0.95%
1993-10.20%0.04%-0.20%-0.89%0.11%-0.74%
Avg-0.40%-0.02%0.00%0.19%0.72%0.49%
 
1997-12.60%-0.81%-0.41%0.60%0.32%2.30%
2001-1-0.82%1.16%-1.92%-1.28%-1.01%-3.87%
2005-10.63%-0.85%0.45%-0.39%0.66%0.49%
2009-12.58%-0.54%0.28%-2.44%1.33%1.22%
2013-10.42%0.11%0.49%-0.12%0.80%1.71%
Avg1.08%-0.19%-0.22%-0.73%0.42%0.37%
 
OTC summary for Presidential Year 1 1965 - 2013
Avg0.25%-0.07%-0.16%-0.17%0.33%0.18%
Win%46%54%46%46%77%62%
 
OTC summary for all years 1963 - 2016
Avg0.07%-0.12%-0.04%-0.09%0.08%-0.10%
Win%57%50%50%56%59%52%
 
SPX Presidential Year 1
YearMonTueWedThurFriTotals
1953-11.09%0.12%-0.12%-0.40%0.24%0.93%
 
1957-1-0.15%-0.30%0.39%0.11%0.50%0.54%
1961-1-0.17%0.09%-0.09%-0.03%0.09%-0.11%
1965-1-0.21%-0.12%0.44%0.37%-0.19%0.28%
1969-10.36%0.47%-0.18%0.41%-0.05%1.01%
1973-1-0.42%0.65%-0.73%-0.81%-1.25%-2.57%
Avg-0.12%0.16%-0.03%0.01%-0.18%-0.17%
 
1977-1-0.31%0.29%-0.69%-0.05%0.30%-0.46%
1981-1-1.54%-0.27%0.35%0.68%-0.01%-0.79%
1985-1-0.05%0.43%-0.08%0.72%1.30%2.32%
1989-1-0.52%-0.26%0.20%0.38%2.24%2.03%
1993-10.11%0.35%0.10%-1.25%0.08%-0.62%
Avg-0.46%0.11%-0.02%0.09%0.78%0.50%
 
1997-12.13%-0.31%-1.47%0.63%0.49%1.48%
2001-1-0.24%-0.18%-0.45%-0.03%-0.76%-1.66%
2005-10.64%-1.07%0.42%-1.00%-0.46%-1.47%
2009-13.39%-0.38%1.74%-1.32%2.41%5.83%
2013-10.19%0.52%0.41%-0.37%0.43%1.19%
Avg1.22%-0.28%0.13%-0.42%0.42%1.07%
 
SPX summary for Presidential Year 1 1953 - 2013
Avg0.27%0.00%0.02%-0.12%0.34%0.50%
Win%44%50%50%44%63%56%
 
SPX summary for all years 1953 - 2016
Avg0.02%-0.01%-0.02%-0.13%0.04%-0.11%
Win%46%47%52%47%54%42%


Conclusion

Market breadth indicators deteriorated last week.

New highs decreased, new lows increased and the secondaries underperformed the blue chips.

I expect the major averages to be lower on Friday May 12 than they were on Friday May 5.

Last week the Russell 2000 was down while the other major averages 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 6 / L 7 / T 5

 

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