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Market Sentiment At Its Lowest In 10 Months

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Stocks sold off last week…

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Technical Market Report for May 20, 2017

The good news is:
• The Market took care of its overbought condition last Wednesday.


The Negatives

New lows spent most of last week above threatening levels 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 continued to deteriorate.

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 deterioration of NY NH also continued.

SPX and NY NH


The Positives

New lows outnumbered new highs for several days last week, but, on Friday, those ratios turned positive

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 to a modestly negative level on Thursday before recovering to a modestly positive level on Friday.

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 with NYSE data.

NY HL Ratio followed a similar pattern finishing the week at a modestly positive 57%.

SPX and NY HL Ratio


Seasonality

Next week includes the 5 trading days prior to the Memorial Day weekend during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.

Congress passed the Uniform Holiday Act in 1968. It became effective in 1971. Prior to the act Memorial Day was observed on May 30. The act moved the observance of Memorial Day to the last Monday in May.

OTC data covers the period from 1971 to 2016 while SPX data runs from 1971 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 modestly positive by all measures.

Report for the 5 days before Memorial Day
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
 Day5Day4Day3Day2Day1Totals
1973-1-2.07% 10.82% 20.49% 32.14% 40.86% 52.24%
 
1977-1-0.87% 1-0.50% 2-0.50% 3-0.01% 4-0.28% 5-2.16%
1981-10.20% 1-0.38% 20.70% 30.33% 40.40% 51.25%
1985-10.95% 1-0.18% 2-0.31% 3-0.30% 40.00% 50.16%
1989-1-0.06% 1-0.37% 20.30% 30.32% 40.52% 50.72%
1993-10.06% 10.05% 21.30% 30.07% 4-0.58% 50.90%
Avg0.06%-0.28%0.30%0.08%0.01%0.17%
 
1997-10.04% 11.69% 20.73% 3-0.09% 41.25% 53.61%
2001-14.85% 10.36% 2-3.04% 31.72% 4-1.36% 52.53%
2005-10.50% 10.24% 2-0.56% 31.03% 40.22% 51.43%
2009-13.11% 10.13% 2-0.39% 3-1.89% 4-0.19% 50.77%
2013-1-0.07% 10.16% 2-1.11% 3-0.11% 4-0.01% 5-1.14%
Avg1.69%0.52%-0.87%0.13%-0.02%1.44%
 
OTC summary for Presidential Year 1 1973 - 2013
Averages0.60%0.18%-0.22%0.29%0.08%0.94%
%Winners64%64%45%55%45%82%
MDD 5/23/2001 3.04% -- 5/22/2009 2.45% -- 5/27/1977 2.14%
 
OTC summary for all years 1971 - 2016
Averages-0.11%-0.15%0.05%0.25%0.14%0.19%
% Winners44%46%59%61%59%63%
 
SPX Presidential Year 1
 Day5Day4Day3Day2Day1Totals
1973-1-1.09% 10.83% 20.47% 32.95% 40.75% 53.91%
 
1977-1-1.31% 1-0.49% 2-0.92% 30.25% 4-0.76% 5-3.23%
1981-10.28% 1-0.34% 2-0.07% 3-0.19% 4-0.32% 5-0.64%
1985-11.23% 1-0.04% 2-0.57% 3-0.51% 40.37% 50.47%
1989-10.23% 1-1.14% 20.26% 30.01% 40.76% 50.12%
1993-10.48% 10.19% 21.02% 3-0.23% 4-0.49% 50.98%
Avg0.18%-0.36%-0.06%-0.13%-0.09%-0.46%
 
1997-10.42% 11.01% 2-0.27% 3-0.44% 41.36% 52.08%
2001-11.62% 1-0.26% 2-1.55% 30.32% 4-1.18% 5-1.06%
2005-10.39% 10.02% 2-0.34% 30.64% 40.10% 50.80%
2009-13.04% 1-0.17% 2-0.51% 3-1.68% 4-0.15% 50.53%
2013-1-0.07% 10.17% 2-0.83% 3-0.29% 4-0.06% 5-1.07%
Avg1.08%0.15%-0.70%-0.29%0.01%0.25%
 
SPX summary for Presidential Year 1 1973 - 2013
Averages0.47%-0.02%-0.30%0.08%0.03%0.26%
%Winners73%45%27%45%45%64%
MDD 5/27/1977 3.20% -- 5/25/2001 2.66% -- 5/22/2009 2.50%
 
SPX summary for all years 1971 - 2019
Averages-0.01%-0.05%-0.04%0.12%0.09%0.12%
% Winners54%48%52%54%57%61%


Conclusion

The market had a bad day last Wednesday, but appears to be recovering.

I expect the major averages to be higher on Friday May 26 than they were on Friday May 19.

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

Good Luck,

YTD W 7 / L 7 / T 6

 

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