Technical market report for July 29, 2017

The good news is:

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

The Negatives

52 week 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 1^st trading day of each month.

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

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.

The Positives

New highs picked up modestly while new lows remained at non threatening levels.

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 a little finishing the week at a strong 71%.

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 fell a little finishing the week at a very strong 85%.

Seasonality

Next week includes the last trading day of July and the first 4 trading days of August during the 1^st 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 1928 to 2016.  There are summaries for both the 1^st year of the Presidential Cycle and all years combined.

Average returns have been modest during the coming week, but a little stronger during the 1^st year of the Presidential Cycle.

Report for the last 1 day of July and the first 4 days of August.

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

               Day1      Day1      Day2      Day3      Day4      Totals

 1965-1       0.74% 5   1.34% 1  -0.02% 2   0.02% 3   0.14% 4     2.21%

 1969-1      -0.58% 4   1.09% 5   1.52% 1  -0.42% 2   0.56% 3     2.17%

 1973-1      -0.22% 2  -1.39% 3  -0.14% 4  -0.15% 5   0.37% 1    -1.53%

 1977-1      -0.03% 5   0.11% 1  -0.36% 2  -0.38% 3   0.37% 4    -0.29%

 1981-1       0.76% 5  -0.58% 1  -0.15% 2   0.45% 3   0.30% 4     0.78%

 1985-1       0.23% 3   0.90% 4   0.17% 5  -0.78% 1  -0.64% 2    -0.12%

 1989-1       0.23% 1  -0.12% 2   0.17% 3   0.63% 4   0.11% 5     1.01%

 1993-1      -0.36% 5   0.42% 1   0.19% 2   0.67% 3   0.24% 4     1.17%

 Avg          0.17%     0.15%     0.01%     0.12%     0.08%       0.51%

 1997-1       0.36% 4   0.03% 5   0.70% 1   1.00% 2   0.55% 3     2.64%

 2001-1       0.46% 2   2.03% 3   0.92% 4  -1.01% 5  -1.55% 1     0.85%

 2005-1      -0.62% 5   0.48% 1   1.04% 2  -0.06% 3  -1.15% 4    -0.31%

 2009-1      -0.29% 5   1.52% 1   0.13% 2  -0.91% 3  -1.00% 4    -0.54%

 2013-1       0.27% 3   1.36% 4   0.38% 5   0.09% 1  -0.74% 2     1.37%

 Avg          0.04%     1.09%     0.63%    -0.18%    -0.78%       0.80%

OTC summary for Presidential Year 1 1965 - 2013

Averages      0.07%     0.55%     0.35%    -0.07%    -0.19%       0.72%

% Winners       54%       77%       69%       46%       62%         62%

MDD  8/6/2001  2.54% --  8/6/2009  1.90% --  8/3/1973  1.89%

OTC summary for all years 1963 - 2016

Averages     -0.04%    -0.02%    -0.18%    -0.06%    -0.01%      -0.31%

% Winners       50%       53%       39%       52%       63%         48%

MDD 8/5/2002  10.28% --  8/6/1990  8.95% --  8/4/2011  7.59%

SPX Presidential Year 1

               Day1      Day1      Day2      Day3      Day4      Totals

 1929-1       1.33% 3   0.69% 4   1.65% 5   0.85% 6  -0.91% 1     3.62%

 1933-1      -4.60% 1   3.02% 2   2.34% 3  -1.24% 4  -2.22% 5    -2.70%

 1937-1       1.25% 6   0.53% 1  -0.82% 2   0.53% 3  -0.65% 4     0.85%

 1941-1      -0.10% 4  -0.48% 5  -0.19% 6   0.39% 1   0.00% 2    -0.38%

 1945-1       0.41% 2   0.14% 3  -0.41% 4   0.41% 5   0.27% 1     0.82%

 1949-1       0.00% 5   0.53% 1   0.26% 2  -0.07% 3  -0.13% 4     0.60%

 1953-1       1.06% 5   0.36% 1  -0.24% 2  -0.40% 3   0.49% 4     1.27%

 Avg          0.53%     0.22%    -0.28%     0.17%     0.00%       0.63%

 1957-1      -0.02% 3  -0.25% 4  -0.23% 5  -0.88% 1  -1.25% 2    -2.63%

 1961-1       0.07% 1   0.91% 2  -0.64% 3   0.52% 4   0.58% 5     1.45%

 1965-1       0.67% 5   0.20% 1   0.05% 2   0.39% 3   0.00% 4     1.31%

 1969-1       2.11% 4   1.79% 5  -0.51% 1   0.45% 2   0.55% 3     4.38%

 1973-1      -0.94% 2  -1.28% 3  -0.15% 4  -0.17% 5   0.23% 1    -2.32%

 Avg          0.38%     0.27%    -0.30%     0.06%     0.02%       0.44%

 1977-1       0.06% 5   0.27% 1  -0.63% 2  -0.13% 3   0.38% 4    -0.05%

 1981-1       0.70% 5  -0.34% 1   0.54% 2   1.14% 3  -0.02% 4     2.01%

 1985-1       0.52% 3   0.62% 4  -0.33% 5  -0.45% 1  -1.41% 2    -1.04%

 1989-1       1.15% 1  -0.67% 2   0.17% 3   0.12% 4  -0.24% 5     0.53%

 1993-1      -0.47% 5   0.45% 1  -0.20% 2  -0.16% 3  -0.09% 4    -0.47%

 Avg          0.39%     0.07%    -0.09%     0.10%    -0.28%       0.20%

 1997-1       0.21% 4  -0.75% 5   0.33% 1   0.22% 2   0.83% 3     0.85%

 2001-1       0.56% 2   0.39% 3   0.40% 4  -0.52% 5  -1.14% 1    -0.32%

 2005-1      -0.77% 5   0.09% 1   0.71% 2   0.07% 3  -0.74% 4    -0.63%

 2009-1       0.07% 5   1.53% 1   0.30% 2  -0.29% 3  -0.56% 4     1.06%

 2013-1      -0.01% 3   1.25% 4   0.16% 5  -0.15% 1  -0.57% 2     0.68%

 Avg          0.01%     0.50%     0.38%    -0.13%    -0.44%       0.33%

SPX summary for Presidential Year 1 1929 - 2013

Averages      0.15%     0.41%     0.12%     0.03%    -0.30%       0.40%

% Winners       64%       73%       50%       50%       32%         59%

MDD  7/31/1933  4.60% --  8/6/1957  2.61% --  8/3/1973  2.53%

SPX summary for all years 1928 - 2016

Averages      0.05%     0.10%    -0.04%     0.12%    -0.17%       0.08%

% Winners       60%       52%       48%       53%       47%         53%

MDD 8/5/2002  8.45% --  8/4/2011  7.73% --  8/4/1998  6.19%

August

Since 1963, over all years, the OTC in August has been up 59% of the time with an average gain of 0.3%.  During the 1^st year of the Presidential Cycle the OTC in August has been up 38% of the time with an average loss of -0.3%.  The best August ever for the OTC was 2000 (+11.7%), the worst 1998 (-19.9%).

The average month has 21 trading days.  The charts below have been calculated by averaging the daily percentage change for each of the 1^st 11 trading days and each of the last 10.  In months when there were more than 21 trading days some of the days in the middle were not counted.  In months when there were less than 21 trading days some of the days in the middle of the month were counted twice.  Dashed vertical lines have been drawn after the 1^st trading day and at 5 trading day intervals after that.  The line is solid on the 11^th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in August over all years since 1963, while the green line shows the average during the 1^st year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 58% of the time in August with an average gain of 0.6%.  During the 1^st year of the Presidential Cycle the SPX has been up 45% of the time with an average loss of -0.1%.  The best August ever for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in August in red and the average daily performance during the 1^st year of the Presidential Cycle, over the same period, in green.

Since 1979 the Russell 2000 (R2K) has been up 58% of the time in August with an average gain of 0.2%.  During the 1^st year of the Presidential Cycle the R2K has been up 44% of the time with an average loss of -0.7%.  The best August ever for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in August in magenta and the average daily performance during the 1^st year of the Presidential Cycle in green.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 64% of the time in August with an average gain of 1.2%.  During the 1^st year of the Presidential Cycle the DJIA has been up 55% of the time in August with an average gain of 0.8%.  The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in August in grey and the average performance during the 1^st year of the Presidential Cycle in green.

Conclusion

This report is nearly identical to last weeks report.  New index highs on mediocre breadth.  A difference was the blue chips outperformed the secondaries last week.

I expect the major averages to be higher on Friday August 4 than they were on Friday July 28.

As far as index performance; last week was the opposite of the previous week.  The Dow Jones Industrial Average was up for the week while everything else was down for the week.  So I am calling last weeks positive forecast a tie.

By Mike Burk