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Lending: The Good, Bad, And Ugly

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Technical market report For July 24, 2017

The good news is:

• All of the major indices closed at all-time highs last Wednesday or Thursday.

The Negatives

New highs continued their failure to confirm the index highs.

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 rose, but failed to confirm the index high by a wide margin.

(Click to enlarge)

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 using NYSE data.

The picture is similar to the chart above.

 

(Click to enlarge)

The Positives

New highs picked up modestly while new lows remained at non threatening levels and the secondaries outperformed the blue chips.

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 rose sharply finishing the week at a very strong 79%.

(Click to enlarge)

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 also rose to a very strong 92%.

(Click to enlarge)

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of July 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 have been modest during the coming week, but a little stronger during the 1st year of the Presidential Cycle.

Report for the week before the 4th Friday of July.

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 -1.67% 0.12% -1.20% -0.46% -0.42% -3.63%
1969-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1973-1 0.07% 0.50% 0.83% -0.02% 0.17% 1.55%

1977-1 0.59% 0.36% 0.05% 0.26% 0.40% 1.67%
1981-1 0.68% -0.24% 0.02% 0.52% 0.76% 1.74%
1985-1 -0.30% -0.20% -0.82% 0.24% 0.06% -1.02%
1989-1 -0.74% 0.11% 0.59% 0.75% 0.08% 0.79%
1993-1 -0.56% 0.87% -0.26% -0.65% 0.68% 0.08%

Avg -0.06% 0.18% -0.08% 0.22% 0.39% 0.65%

1997-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2001-1 -2.01% -1.47% 1.28% 1.95% 0.30% 0.04%
2005-1 -0.55% 1.32% 0.71% -0.46% 0.05% 1.07%
2009-1 0.10% 0.39% -0.39% 0.84% -0.29% 0.64%
2013-1 0.36% -0.59% 0.01% 0.71% 0.22% 0.71%

Avg -0.53% -0.09% 0.40% 0.76% 0.07% 0.62%

OTC summary for Presidential Year 1 1965 - 2013
Avg -0.37% 0.11% 0.07% 0.34% 0.18% 0.33%
Win% 45% 64% 64% 64% 82% 82%

OTC summary for all years 1963 - 2016
Avg -0.32% -0.11% 0.14% 0.10% 0.00% -0.20%
Win% 42% 56% 56% 64% 62% 56%


SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.53% -0.25% 0.12% 0.17% 0.00% -0.49%

1957-1 -0.23% 0.19% 0.10% 0.00% -0.33% -0.27%
1961-1 0.02% 0.55% 0.94% 1.17% 0.15% 2.83%
1965-1 -0.07% -1.26% -0.57% -0.26% 0.26% -1.90%
1969-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1973-1 0.35% 0.58% 1.39% 0.19% -0.24% 2.27%

Avg 0.02% 0.01% 0.46% 0.37% -0.04% 0.73%

1977-1 0.77% 0.83% -0.06% -0.14% 0.08% 1.48%
1981-1 1.12% -0.59% 0.02% 0.66% 0.70% 1.91%
1985-1 -0.40% -0.93% -0.50% 0.25% 0.18% -1.40%
1989-1 -0.66% 0.06% 1.25% 1.17% 0.05% 1.86%
1993-1 0.06% 0.29% -0.03% -0.60% 0.58% 0.31%

Avg 0.18% -0.07% 0.13% 0.27% 0.32% 0.83%

1997-1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2001-1 -1.64% -1.63% 1.61% 1.04% 0.24% -0.37%
2005-1 -0.55% 0.67% 0.48% -0.66% 0.54% 0.48%
2009-1 0.30% -0.26% -0.46% 1.19% 0.07% 0.84%
2013-1 0.20% -0.19% -0.38% 0.26% 0.08% -0.02%

Avg -0.42% -0.35% 0.31% 0.46% 0.23% 0.23%

SPX summary for Presidential Year 1 1953 - 2013
Avg -0.09% -0.14% 0.28% 0.34% 0.18% 0.54%
Win% 50% 50% 57% 69% 85% 57%

SPX summary for all years 1953 - 2016
Avg -0.18% -0.10% 0.31% 0.18% 0.00% 0.21%
Win% 33% 52% 61% 64% 62% 57%


Conclusion

New index highs are good. The secondaries have been modestly outperforming the blue chips and that is good. The breadth indicators are not great, but ok.

I expect the major averages to be higher on Friday July 28 than they were on Friday July 21.

Last week the Dow Jones Industrial Average was down a little while everything else was up a little so I am calling last weeks positive forecast a tie.

YTD W 10 / L 9 / T 10

By Mike Burk for Safehaven.com

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