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Technical Market Report

The good news is:
• Stronger than average Septembers have usually been followed by positive Octobers and, so far, this September has been stronger than average.

Short term

Sellers are gaining enthusiasm.

The chart below covers the past year showing the NASDAQ composite (OTC) in magenta and momentum of NASDAQ downside volume in green. Dashed vertical grey lines have been drawn on the 1st trading day of each month the line is red showing the 1st trading day of the year. The indicator is plotted on an inverted Y axis to make it easy to read; increasing down volume moves the indicator downward (up is good). The indicator became jumbled last spring, but since June or July it has done a good job of indicating market direction and it is moving downward.

Intermediate term

New lows have been increasing modestly.

Momentum indicators are used to smooth out minor movements but leave the longer trend visible.

The chart below shows the OTC in magenta and momentum of NASDAQ new lows in brown. Like the above chart the indicator has been plotted on an inverted Y axis so up is good. The indicator has turned downward.

Seasonality

Next week is the last week of September during the 2nd year of the Presidential Cycle.

The tables below show daily returns for the last 5 trading days of September. OTC data covers the period from 1966 - 2002 and S&P 500 (SPX) data from 1930 - 2002 during the 2nd year of the Presidential Cycle. There are summaries for both the 2nd year of the Presidential Cycle and all years combined beginning with 1963 for the OTC and 1928 for the SPX.

The coming week has been up less than half of the time by most measures and the average returns have all been negative. Returns for the week have been lower over the past 40 years than they were earlier.

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 2
Year Day5 Day4 Day3 Day2 Day1 Totals
1966-2 0.11% 1 0.34% 2 0.27% 3 -1.06% 4 -0.96% 5 -1.29%
1970-2 1.10% 4 2.26% 5 0.55% 1 0.49% 2 0.57% 3 4.97%
1974-2 -1.36% 2 -0.15% 3 -1.51% 4 -1.30% 5 -2.54% 1 -6.86%
1978-2 -0.14% 1 0.61% 2 -0.68% 3 -0.01% 4 0.67% 5 0.45%
1982-2 0.24% 5 0.02% 1 0.21% 2 -0.41% 3 -0.32% 4 -0.26%
Avg -0.01% 0.62% -0.23% -0.46% -0.52% -0.60%
 
1986-2 0.33% 3 -0.85% 4 0.03% 5 -1.08% 1 0.90% 2 -0.67%
1990-2 -2.79% 1 0.74% 2 -1.34% 3 -2.53% 4 0.97% 5 -4.93%
1994-2 -0.24% 1 -0.03% 2 0.61% 3 -0.09% 4 0.65% 5 0.90%
1998-2 -2.27% 4 1.35% 5 -0.25% 1 -0.29% 2 -2.32% 3 -3.79%
2002-2 -0.23% 2 3.39% 3 -0.06% 4 -1.84% 5 -2.26% 1 -0.99%
Avg -1.04% 0.92% -0.20% -1.16% -0.41% -1.90%
 
OTC summary for Presidential Year 2 1966 - 2002
Averages -0.53% 0.77% -0.22% -0.81% -0.46% -1.25%
% Winners 40% 70% 50% 10% 50% 30%
MDD 9/30/1974 6.69% -- 9/27/1990 5.81% -- 9/30/2002 4.11%
 
OTC summary for all years 1963 - 2005
Averages -0.12% -0.06% -0.21% 0.02% -0.11% -0.47%
% Winners 56% 50% 44% 48% 51% 47%
MDD 9/30/1974 6.69% -- 9/30/2003 6.04% -- 9/27/1990 5.81%
 
SPX Presidential Year 2
Year Day5 Day4 Day3 Day2 Day1 Totals
1930-2 -1.89% 4 -1.52% 5 -0.72% 6 -2.23% 1 -1.43% 2 -7.79%
1934-2 2.81% 2 -0.66% 3 0.99% 4 -1.09% 5 0.22% 6 2.27%
1938-2 -2.99% 1 -0.27% 2 4.46% 3 3.66% 4 2.86% 5 7.71%
1942-2 0.45% 5 -0.22% 6 0.11% 1 -0.45% 2 0.00% 3 -0.11%
 
1946-2 2.15% 2 2.58% 3 1.13% 4 -1.05% 5 -0.99% 1 3.82%
1950-2 -0.10% 1 -1.44% 2 1.41% 3 0.05% 4 0.15% 5 0.07%
1954-2 0.68% 5 0.40% 1 0.49% 2 -0.58% 3 -0.58% 4 0.41%
1958-2 0.44% 3 -0.42% 4 0.18% 5 0.42% 1 0.38% 2 1.01%
1962-2 -1.84% 1 0.58% 2 -1.42% 3 -0.68% 4 0.90% 5 -2.46%
Avg 0.27% 0.34% 0.36% -0.37% -0.03% 0.57%
 
1966-2 0.24% 1 0.31% 2 -1.27% 3 -1.04% 4 0.33% 5 -1.42%
1970-2 1.30% 4 0.07% 5 -0.13% 1 0.52% 2 -0.11% 3 1.66%
1974-2 -2.02% 2 -0.66% 3 -1.64% 4 -2.29% 5 -2.16% 1 -8.76%
1978-2 0.02% 1 0.75% 2 -0.94% 3 0.30% 4 0.57% 5 0.69%
1982-2 -0.40% 5 0.24% 1 -0.31% 2 -1.31% 3 -0.97% 4 -2.74%
Avg -0.17% 0.14% -0.86% -0.76% -0.47% -2.11%
 
1986-2 0.26% 3 -1.88% 4 0.17% 5 -1.00% 1 0.61% 2 -1.84%
1990-2 -2.16% 1 1.20% 2 -1.04% 3 -1.34% 4 1.69% 5 -1.65%
1994-2 0.25% 1 0.27% 2 0.60% 3 -0.56% 4 0.10% 5 0.66%
1998-2 -2.19% 4 0.19% 5 0.38% 1 0.03% 2 -3.05% 3 -4.64%
2002-2 -1.73% 2 2.49% 3 1.82% 4 -3.23% 5 -1.46% 1 -2.11%
Avg -1.12% 0.45% 0.39% -1.22% -0.42% -1.91%
 
SPX summary for Presidential Year 2 1930 - 2002
Averages -0.35% 0.11% 0.23% -0.62% -0.15% -0.80%
% Winners 53% 58% 58% 32% 53% 47%
MDD 9/30/1974 8.47% -- 9/30/1930 7.56% -- 9/30/2002 4.64%
 
SPX summary for all years 1928 - 2005
Averages -0.23% -0.13% 0.08% -0.14% -0.05% -0.47%
% Winners 49% 47% 55% 53% 48% 51%
MDD 9/30/1931 11.08% -- 9/30/1974 8.47% -- 9/30/1930 7.56%

Conclusion

Most short and intermediate term indicators have turned downward and seasonally next week has averaged a negative return.

I expect the major indices to be lower on Friday September 29 than they were on Friday September 22.

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.

 

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