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Technical market report for September 23, 2017

The good news is:

  • The Russell 2000 (R2K) closed at an all time high Friday and all of the other major indices hit all time highs earlier in the week.

The Negatives

The negatives are fading

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 failed to confirm the all-time high in the index; however, it is developing an up trend by a couple measures.  The past month has been nearly straight up and its recent high is above its late July high.

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 from NYSE data.

NY NH has not been as strong as OTC NH.

NY NH failed to confirm the index high and it is still below its late July high.  However, it has been in a well-defined uptrend since late August.

The Positives

New highs have been increasing while new lows have been insignificant and the secondaries have been outperforming 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 finished the week where it was last Friday at a very strong 84%.

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 declined slightly finishing the week at a very strong 92%.

Seasonality

Next week includes the last 5 trading days of September 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 1928 to 2016.  There are summaries for both the 1st year of the Presidential Cycle and all years combined.

Average returns have been mixed, but stronger during the 1st year of the Presidential Cycle than other years.

Report for the last 5 days of September.

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

               Day5      Day4      Day3      Day2      Day1      Totals

 1965-1      -0.69% 5   0.09% 1   0.19% 2   0.07% 3  -0.88% 4    -1.21%

 1969-1       0.77% 3  -0.17% 4  -0.27% 5  -0.36% 1  -0.39% 2    -0.42%

 1973-1       0.21% 1   0.10% 2   0.75% 3   0.59% 4  -0.06% 5     1.58%

 1977-1       0.17% 1   0.00% 2   0.22% 3   0.31% 4   0.58% 5     1.28%

 1981-1       0.22% 4  -2.92% 5  -0.05% 1   1.99% 2   0.85% 3     0.09%

 1985-1       0.61% 1  -0.69% 2  -0.81% 3  -0.57% 4   0.05% 1    -1.41%

 1989-1      -0.29% 1   0.24% 2  -0.01% 3   0.72% 4   0.38% 5     1.03%

 1993-1       0.32% 5   0.70% 1   0.49% 2  -0.06% 3  -0.05% 4     1.39%

 Avg          0.21%    -0.53%    -0.03%     0.48%     0.36%       0.48%

 1997-1      -0.59% 3  -0.50% 4   0.20% 5   0.70% 1  -0.48% 2    -0.68%

 2001-1       5.35% 1   0.15% 2  -2.50% 3  -0.23% 4   2.61% 5     5.38%

 2005-1       0.22% 1  -0.24% 2  -0.05% 3   1.22% 4   0.49% 5     1.64%

 2009-1      -1.12% 4  -0.79% 5   1.90% 1  -0.31% 2  -0.08% 3    -0.40%

 2013-1       0.08% 2  -0.19% 3   0.70% 4  -0.15% 5  -0.27% 1     0.17%

 Avg          0.79%    -0.31%     0.05%     0.24%     0.45%       1.22%

OTC summary for Presidential Year 1 1965 - 2013

Averages      0.41%    -0.32%     0.06%     0.30%     0.21%       0.65%

% Winners       69%       38%       54%       54%       46%         62%

MDD  9/28/1981  2.97% --  9/27/2001  2.73% --  9/26/1985  2.06%

OTC summary for all years 1963 - 2016

Averages     -0.03%    -0.07%    -0.19%    -0.17%    -0.03%      -0.49%

% Winners       56%       49%       48%       43%       46%         46%

MDD 9/29/2008  9.28% --  9/30/1974  6.69% --  9/30/2003  6.04%

SPX Presidential Year  1

               Day5      Day4      Day3      Day2      Day1      Totals

 1929-1       0.16% 3   0.91% 4  -2.76% 5   0.56% 6  -0.92% 1    -2.05%

 1933-1      -0.89% 2  -4.17% 3   1.45% 4  -0.72% 5   1.13% 6    -3.19%

 1937-1      -0.83% 6   4.13% 1   0.66% 2   0.51% 3  -0.22% 4     4.24%

 1941-1      -1.27% 4  -0.30% 5   0.40% 6   0.00% 1   0.69% 2    -0.48%

 1945-1       0.13% 2  -0.06% 3  -0.38% 4   1.20% 5   0.69% 6     1.57%

 1949-1      -0.26% 1  -0.77% 2   0.78% 3   0.58% 4  -0.26% 5     0.07%

 1953-1       0.04% 4   0.26% 5   0.64% 1   0.17% 2  -0.60% 3     0.52%

 Avg         -0.44%     0.65%     0.42%     0.49%     0.06%       1.19%

 1957-1       0.68% 2  -1.21% 3   0.26% 4  -0.05% 5  -0.31% 1    -0.62%

 1961-1      -1.42% 1   0.02% 2   1.05% 3   0.17% 4   0.23% 5     0.03%

 1965-1       0.18% 5   0.70% 1  -0.24% 2  -0.45% 3  -0.07% 4     0.12%

 1969-1      -0.14% 3  -0.76% 4  -0.64% 5  -0.80% 1  -0.31% 2    -2.65%

 1973-1       0.15% 1   0.64% 2   0.72% 3   0.23% 4  -0.60% 5     1.15%

 Avg         -0.11%    -0.12%     0.23%    -0.18%    -0.21%      -0.40%

 1977-1       0.36% 1  -0.15% 2   0.07% 3   0.57% 4   0.71% 5     1.56%

 1981-1      -0.55% 4  -1.95% 5   2.45% 1   0.35% 2   0.21% 3     0.51%

 1985-1       1.24% 1  -0.91% 2  -1.07% 3   0.35% 4   0.44% 1     0.04%

 1989-1      -0.81% 1   0.03% 2   0.22% 3   1.01% 4   0.16% 5     0.61%

 1993-1      -0.02% 5   0.91% 1  -0.06% 2  -0.31% 3  -0.26% 4     0.26%

 Avg          0.04%    -0.41%     0.32%     0.40%     0.25%       0.60%

 1997-1      -0.78% 3  -0.70% 4   0.78% 5   0.86% 1  -0.64% 2    -0.47%

 2001-1       3.90% 1   0.88% 2  -0.52% 3   1.15% 4   2.19% 5     7.60%

 2005-1       0.03% 1   0.00% 2   0.10% 3   0.89% 4   0.09% 5     1.11%

 2009-1      -0.95% 4  -0.61% 5   1.78% 1  -0.22% 2  -0.33% 3    -0.34%

 2013-1      -0.26% 2  -0.27% 3   0.35% 4  -0.41% 5  -0.60% 1    -1.20%

 Avg          0.39%    -0.14%     0.50%     0.45%     0.14%       1.34%

SPX summary for Presidential Year 1 1929 - 2013

Averages     -0.06%    -0.15%     0.27%     0.26%     0.07%       0.38%

% Winners       45%       45%       68%       64%       45%         64%

MDD  9/27/1933  5.02% --  9/30/1929  3.12% --  9/30/1969  2.62%

SPX summary for all years 1928 - 2016

Averages     -0.17%    -0.11%     0.07%    -0.22%    -0.01%      -0.44%

% Winners       47%       45%       57%       52%       45%         49%

MDD 9/30/1931  11.08% --  9/29/2008  8.79% --  9/30/1974  8.47%

Conclusion

New highs are increasing and the secondaries have been outperforming the blue chips.  These are the right ingredients for a strong market.

I expect the major averages to be higher on Friday September 29 than they were on Friday September 22.

Last week the OTC was down a little while the other major indices were up a little so I am calling last weeks negative forecast a tie.

By Mike Burk

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