• 141 days Could Crypto Overtake Traditional Investment?
  • 146 days Americans Still Quitting Jobs At Record Pace
  • 148 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 151 days Is The Dollar Too Strong?
  • 151 days Big Tech Disappoints Investors on Earnings Calls
  • 152 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 154 days China Is Quietly Trying To Distance Itself From Russia
  • 154 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 158 days Crypto Investors Won Big In 2021
  • 158 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 159 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 161 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 162 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 165 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 166 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 166 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 168 days Are NFTs About To Take Over Gaming?
  • 169 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 172 days What’s Causing Inflation In The United States?
  • 173 days Intel Joins Russian Exodus as Chip Shortage Digs In
Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

Technical Market Report

The good news is:
 • The small caps have been stronger than the blue chips during therecent period of weakness.

Short term

The chart below covers the past year with dashed vertical lines on the 1st trading day of each month. The NASDAQ composite (OTC) is shown in red and momentum of NASDAQ downside volume (OTC DV) is shown in blue. Direction, not level, of the indicator is most important. As of Friday's close the indicator was heading downward.

It is possible that Friday was the bottom because the ratio of upside to downside volume was extreme. On the NASDAQ there were 2,067,770 shares traded of issues that declined in price and only 244,633,130 shares traded of issues that advanced in price a ratio of about 8.5 to 1. Total volume hit its highest level for the year so far on the NYSE and second highest on the NASDAQ.

The chart below covers the past 3 months showing the NASDAQ daily up/down volume ratio in blue and the OTC in red. I have drawn a horizontal line at last Friday's level which has only been reached twice before in the past 3 months. Each of the previous two occurrences were at or near a short term low.

The NASDAQ new high indicator ( OTC NH) is a 10% trend (19 day EMA) of NASDAQ new highs. The chart below covers the period from late August through last Friday. The OTC is shown in red and OTC NH is shown in green.

The indicator turned upward with Thursday's rally and continued moving upward on Friday even though Friday was down from the open. In early December the indicator continued moving upward for 2 days after the market turned downward so Monday will be important for this indicator.

As of Friday the value of the indicator was 132 so more than 132 new highs will move the indicator upward while less than 132 will move the indicator downward.

Intermediate term

The secondaries lead both up and down.

The chart below shows the OTC in red and a FastTrack relative strength indicator called Accutrack (AT) in black. AT is comparing the Russell 2000 (R2K) and the S&P 500 (SPX). When the indicator rises the R2K is outperforming the SPX.

While the market fell last week, AT rose sharply indicating the R2K held up better than the SPX.

Seasonality

Options expire on the 3rd Friday of each month. For about 10 years beginning in the mid 1980's perceived higher levels of volatility were blamed on options expiration. The tables below show the week after the 3rd Friday of January during the 2nd year of the Presidential cycle. The tables cover years 1966 - 2002 for the OTC and 1930 - 2002 for the SPX. There are summaries for all years 1963 - 2005 for the OTC and 1928 - 2005 for the SPX. Options were not actively traded before the early 1980's.

The week following to the 3rd Friday has on average been a little weak. Since the mid 1980's the market has been a little weaker than it was before during the week following options expiration.

Report for the week after options expiration during January.
The number following the year is its position in the presidential cycle.
Daily returns from Monday to Friday after option expiration.

OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.12% -0.07% 0.27% -0.08% 0.02% 0.25%
 
1970-2 -0.93% -0.91% 0.00% 0.31% 0.18% -1.36%
1974-2 -0.88% 0.86% 0.49% -0.16% -0.22% 0.09%
1978-2 -0.29% 0.20% 0.33% -0.34% 0.09% -0.01%
1982-2 -1.24% -0.06% 0.09% 1.44% 1.17% 1.39%
1986-2 -0.37% -0.30% -0.54% -0.02% 0.66% -0.56%
Avg -0.74% -0.04% 0.09% 0.25% 0.38% -0.09%
 
1990-2 -2.03% -0.38% -1.08% -0.10% -0.92% -4.50%
1994-2 -0.46% -0.54% 0.31% 0.52% 0.46% 0.29%
1998-2 -0.91% 1.74% -0.14% -0.72% -0.04% -0.07%
2002-2 0.32% -2.48% 2.12% 1.05% -0.25% 0.76%
Avg -0.77% -0.41% 0.30% 0.19% -0.19% -0.88%
 
OTC summary for Presidential year 1 1966 - 2002
Avg -0.67% -0.19% 0.20% 0.19% 0.11% -0.37%
Win% 20% 30% 67% 40% 60% 50%
 
OTC summary for all years 1963 - 2005
Avg -0.16% 0.04% 0.08% 0.15% 0.07% 0.19%
Win% 55% 44% 50% 48% 69% 60%
 
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1930-2 0.61% 0.51% 0.09% 0.97% 0.00% 2.18%
1934-2 -0.27% 1.28% 0.63% 0.00% 0.00% 1.64%
1938-2 -0.09% -1.58% -3.83% -1.39% 0.00% -6.89%
1942-2 0.45% -0.22% -1.45% 0.00% 0.00% -1.23%
1946-2 -1.99% 0.68% 1.18% 0.28% 0.00% 0.14%
Avg -0.26% 0.13% -0.68% -0.05% 0.00% -0.83%
 
1950-2 -0.12% -0.35% -0.71% -0.06% 0.00% -1.24%
1954-2 0.31% 0.62% -0.31% 0.04% 0.23% 0.89%
1958-2 0.61% -0.12% -0.24% 0.39% 0.85% 1.48%
1962-2 0.09% -0.76% 0.16% -0.07% -0.32% -0.90%
1966-2 0.26% 0.15% -0.16% -0.03% -0.38% -0.17%
Avg 0.23% -0.09% -0.25% 0.05% 0.09% 0.01%
 
1970-2 -1.40% 0.20% 0.09% 0.04% -0.98% -2.04%
1974-2 -0.17% 1.21% 0.54% -0.26% -0.20% 1.12%
1978-2 -0.72% 0.01% 0.16% -0.91% 0.00% -1.46%
1982-2 0.03% -0.19% 0.48% 2.75% 1.24% 4.30%
1986-2 -0.43% -0.84% -1.12% 0.37% 1.07% -0.95%
Avg -0.54% 0.08% 0.03% 0.40% 0.28% 0.20%
 
1990-2 -2.59% 0.37% -0.41% -1.27% -0.09% -3.97%
1994-2 -0.58% -0.22% 0.48% 0.81% 0.35% 0.84%
1998-2 -0.07% 1.78% -0.80% -0.80% -0.57% -0.45%
2002-2 -0.02% -0.73% 0.79% 0.35% 0.10% 0.49%
Avg -0.81% 0.30% 0.02% -0.22% -0.05% -0.77%
 
SPX summary for Presidential Year 2 1930 - 2002
Avg -0.32% 0.09% -0.23% 0.07% 0.11% -0.33%
Win% 37% 53% 53% 53% 50% 47%
 
SPX summary for all years 1928 - 2005
Avg -0.23% 0.10% 0.01% 0.08% 0.06% -0.01%
Win% 41% 58% 51% 53% 58% 59%

Conclusion

Friday looked like a selling climax so it is unlikely there will be much more movement to the downside.

I expect the major indices to be higher on Friday January 27 than they were on Friday January 20.

This report is free to anyone who wants it, so please tell your friends. They can sign up at: http://alphaim.net/signup.html. If it is not for you, reply with REMOVE in the subject line.

Back to homepage

Leave a comment

Leave a comment