Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Oversold Stock Market Expected to Bounce Higher Next Week

Stock-Markets / Stock Index Trading May 23, 2009 - 02:16 PM GMT

By: Mike_Burk

Stock-Markets

Best Financial Markets Analysis ArticleThe good news is: In spite of being down all of the last 4 days of last week, all of the major indices finished higher for the week.

Short Term: A reaction usually follows 4 consecutive days in either direction.


On Balance Volume (OBV) is calculated by adding the volume on up days and subtracting the volume on down days from a running total. OBV can be calculated on individual issues or the market as a whole. The idea is an issue or market is strong if volume is higher on up days than it is on down days or weak if the down days have higher volume than up days. Indicators often have biases and OBV calculated from NYSE data has a somewhat positive bias.

The first chart covers the last 3 months showing the S&P 500 in red and an indicator derived from NYSE OBV in black. The indicator shows the percentage of the last 3 trading days that NYSE OBV has been up. The indicator touches the top of the chart when NYSE OBV has been up for 3 consecutive days and it touches the bottom of the chart when NYSE OBV has been down for 3 consecutive days. NYSE OBV itself is not shown. Dashed vertical lines have been drawn on the 1st trading day of each month.

The indicator has hit the bottom of the chart in each of the last 2 weeks for the 1st time since the early March lows.

The next chart is similar to the previous one except it covers the last year to give you a broader perspective.

Its positive bias makes the indicator quick to indicate up moves with a lot of false signals. Its record for indicating the beginning of downside moves is a lot better, especially when it hits the bottom of the chart more than once in a relatively short period like we have just seen.

It also indicates a short term oversold condition and a high likelihood of a bounce in the next few days.

Intermediate term

On March 6 there were 827 new lows on the NYSE and 567 on the NASDAQ. Those numbers are big enough to suggest a high likelihood of a retest of the March 9 lows.

A ratio of new highs to new lows (NH / (NH + NL) is one of the best indicators we have for defining both tops and bottoms and the general health of the market.

I have been showing updates of the chart below for the last several weeks. It covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend (4 day EMA) of NASDAQ new highs / (new highs + new lows) in red. Dashed vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% levels of the indicator. The horizontal line is solid at the 50% level.

Considering the OTC was down the last 3 days of the week, the indicator held up very well.

The next chart is similar to the one above except it shows the SPX in red and the indicator calculated from NYSE data in dark blue.

The indicator calculated from NYSE data also recovered nicely last week.

Seasonality

Next week includes the last 4 trading days in May during the 1st year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the last 4 trading days of May during the 1st year of the Presidential Cycle. OTC data covers the period from 1963 - 2008 and SPX data from 1928 - 2008. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

The week has, on average, shown modest losses during the 1st year of the Presidential Cycle and modest gains over all years.

Report for the last 4 days of May.
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
  Day4 Day3 Day2 Day1 Totals
1965-1 -0.73% 2 0.60% 3 -0.83% 4 -0.36% 5 -1.32%
 
1969-1 -0.13% 1 -0.09% 2 -0.75% 3 -0.27% 4 -1.24%
1973-1 0.86% 5 -0.30% 2 -1.58% 3 -0.53% 4 -1.56%
1977-1 -0.50% 3 -0.01% 4 -0.28% 5 -0.32% 2 -1.11%
1981-1 0.46% 2 0.88% 3 0.51% 4 0.07% 5 1.92%
1985-1 -0.43% 2 -0.08% 3 -0.24% 4 0.30% 5 -0.46%
Avg 0.05% 0.08% -0.47% -0.15% -0.49%
 
1989-1 0.32% 4 0.52% 5 -0.22% 2 0.44% 3 1.06%
1993-1 0.05% 2 1.30% 3 0.07% 4 -0.58% 5 0.85%
1997-1 1.40% 2 0.07% 3 -0.51% 4 -0.19% 5 0.77%
2001-1 -1.36% 5 -3.35% 2 -4.18% 3 1.25% 4 -7.65%
2005-1 -0.56% 3 1.03% 4 0.22% 5 -0.36% 2 0.33%
Avg -0.03% -0.09% -0.93% 0.11% -0.93%
 
OTC summary for Presidential Year 1 1965 - 2005
Averages -0.06% 0.05% -0.71% -0.05% -0.76%
% Winners 45% 55% 27% 36% 45%
MDD 5/30/2001 8.65% -- 5/31/1973 2.41% -- 5/28/1965 1.32%
 
OTC summary for all years 1963 - 2008
Averages -0.01% 0.05% 0.17% 0.27% 0.49%
% Winners 52% 63% 57% 72% 61%
MDD 5/30/2001 8.65% -- 5/27/1970 3.17% -- 5/25/1999 2.97%
 
SPX Presidential Year 1
  Day4 Day3 Day2 Day1 Totals
1929-1 -3.32% 1 1.61% 2 0.12% 3 0.85% 5 -0.73%
1933-1 2.86% 5 3.21% 6 1.45% 1 -1.43% 3 6.10%
1937-1 -1.28% 2 -0.12% 3 0.18% 4 0.00% 5 -1.21%
1941-1 0.64% 2 0.00% 3 -0.11% 4 -0.32% 6 0.22%
1945-1 0.54% 6 1.08% 1 0.53% 2 -0.66% 4 1.49%
Avg -0.11% 1.16% 0.44% -0.31% 1.17%
 
1949-1 0.48% 3 -0.07% 4 -0.34% 5 -2.21% 2 -2.13%
1953-1 -0.48% 2 -0.92% 3 -0.73% 4 0.33% 5 -1.81%
1957-1 -0.91% 1 -0.19% 2 0.90% 3 0.68% 5 0.48%
1961-1 -0.63% 3 -0.38% 4 0.64% 5 0.20% 3 -0.18%
1965-1 0.58% 2 -0.34% 3 -0.52% 4 0.66% 5 0.38%
Avg -0.19% -0.38% -0.01% -0.07% -0.65%
 
1969-1 -0.22% 1 -0.76% 2 -0.30% 3 0.19% 4 -1.08%
1973-1 0.75% 5 -0.40% 2 -1.49% 3 -0.91% 4 -2.05%
1977-1 -0.92% 3 0.25% 4 -0.76% 5 -0.16% 2 -1.59%
1981-1 1.10% 2 0.75% 3 -0.24% 4 -0.64% 5 0.97%
1985-1 -0.23% 2 -0.10% 3 0.04% 4 0.96% 5 0.67%
Avg 0.09% -0.05% -0.55% -0.11% -0.62%
 
1989-1 0.01% 4 0.76% 5 -0.79% 2 0.46% 3 0.44%
1993-1 0.19% 2 1.02% 3 -0.23% 4 -0.49% 5 0.49%
1997-1 0.32% 2 -0.29% 3 -0.37% 4 0.50% 5 0.15%
2001-1 -1.18% 5 -0.78% 2 -1.57% 3 0.62% 4 -2.91%
2005-1 -0.34% 3 0.64% 4 0.10% 5 -0.61% 2 -0.21%
Avg -0.20% 0.27% -0.57% 0.10% -0.41%
 
SPX summary for Presidential Year 1 1929 - 2005
Averages -0.10% 0.25% -0.17% -0.10% -0.13%
% Winners 50% 40% 40% 50% 50%
MDD 5/30/2001 3.49% -- 5/27/1929 3.32% -- 5/31/1973 2.77%
 
SPX summary for all years 1928 - 2008
Averages 0.06% -0.03% 0.18% 0.04% 0.25%
% Winners 56% 49% 60% 59% 62%
MDD 5/31/1932 12.52% -- 5/28/1962 8.45% -- 5/31/1935 4.49%

Money supply (M2)

The chart below was provided by Gordon Harms. Money supply growth has continued to fall.

Conclusion

Based on the number of consecutive down days, the market is oversold and likely to bounce. In the next week or two the blue chip indices could hit new highs which would likely be the top for this cycle.

I expect the major indices to be higher on Friday May 29 than they were on Friday May 22.

Last weeks negative forecast was a miss.

Thank you,

By Mike Burk
To subscribe to this report : http://alphaim.net/signup.html

Gordon Harms produces a Power Point for our local timing group. You can get a copy of that at: http://www.stockmarket-ta.com/ .

Disclaimer: Mike Burk is an employee and principal of Alpha Investment Management (Alpha) a registered investment advisor. Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy. Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) and the Wall Street Journal (wsj.com). Historical data is from Barron's and ISI price books. The views expressed are provided for information purposes only and should not be construed in any way as investment advice. Furthermore, the opinions expressed may change without notice.

Mike Burk Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in