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
Investing in the METAVERSE Stocks Universe - 8th Dec 21
Stock Market Sentiment Speaks: I Expect 15-20% Returns For 2022 - 8th Dec 21
US Dollar Still Has the Green Light - 8th Dec 21
Stock Market Topping Process Roadmap - 8th Dec 21
The Lithium Breakthrough That Could Transform The Mining Industry - 8th Dec 21
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks at Extreme Oversold Levels

Stock-Markets / US Stock Markets Jul 06, 2008 - 01:48 AM GMT

By: Mike_Burk

Stock-Markets

The good news is: The market is very oversold and likely to bounce (No change).

Short Term Overbought - oversold is a description of a price move within a given time frame. Currently the market is oversold by virtually any measure over any time frame.


The chart below covers the past year showing the S&P 500 (SPX) in red and an indicator that is calculated by subtracting the number of times the NYSE advance - decline line (NY ADL) has been down for 2 consecutive days from the number of times it has been up for 2 consecutive days over the past 21 trading days. The NY ADL is a running total of the number of NYSE declining issues subtracted from advancing issues. Dashed vertical lines have been drawn on the 1st trading day of each month.

This indicator is at its lowest level since the July 2002 low several months ahead of the 2002 bottom. From the July 2002 low the SPX rallied 20.7% in a month before falling to its final low about 2 months later.

The chart below shows the 2002 period.

Intermediate Term

The ambiguity over whether or not we should expect a retest was resolved last week when the NYSE recorded 652 new lows on Wednesday and the NASDAQ recorded 453.

The chart below covers the past year showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in black. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

Last week the indicator fell below its March low.

The next chart is similar to the one above except it shows the Russell 2000 (R2K) in red and new lows have been calculated from the component issues of the R2K over the a trailing 6 week period rather than 52 weeks as reported by the exchanges.

The pattern is similar to the above chart except the lowest low for NL was recorded last August and the current level for NL is only slightly above the level of last August.

The next chart is similar to the one above except the index is the SPX shown in red and NL has been calculated from the component issues of the SPX over a trailing 6 week period.

This indicator is at its lowest level since just ahead of the 2002 bottom.

The extreme levels of new lows imply a high probability of a retest of the current low.

Seasonality

Next week is the week prior to the 2nd Friday of July during the 4th year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the week prior to the 2nd Friday of July during the 4th year of the Presidential Cycle. OTC data covers the period from 1963 - 2007 and SPX data from 1953 - 2007. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been omitted.

By all measures the coming week has had, on average modest returns and the 4th year of the Presidential cycle has been weaker than the average.

Report for the week before the 2nd Friday of July.
The number following the year is the position in the presidential cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1964-4 0.05% 0.15% 0.22% 0.20% 0.37% 0.98%
1968-4 -0.06% 0.19% 0.00% -0.20% -0.28% -0.35%
1972-4 -0.49% -0.29% -0.28% -0.83% 0.27% -1.62%
1976-4 0.00% -0.29% -0.02% 0.21% 0.76% 0.66%
1980-4 1.03% 0.32% 0.03% 0.94% 0.78% 3.10%
1984-4 0.11% -0.31% -0.61% -0.26% 0.19% -0.87%
Avg 0.15% -0.08% -0.22% -0.03% 0.34% 0.19%
1988-4 0.00% 0.36% -0.17% -0.01% -0.28% -0.09%
1992-4 0.43% 0.88% 0.05% 0.13% -0.98% 0.49%
1996-4 -0.83% 0.42% -1.06% -3.08% -0.25% -4.80%
2000-4 -1.07% -0.60% 3.62% 1.84% 1.71% 5.50%
2004-4 0.00% -2.15% 0.13% -1.56% 0.57% -3.01%
Avg -0.49% -0.22% 0.52% -0.54% 0.15% -0.38%
OTC summary for Presidential Year 4 1964 - 2004
Avg -0.10% -0.12% 0.19% -0.24% 0.26% 0.00%
Win% 50% 55% 50% 45% 64% 45%
OTC summary for all years 1963 - 2007
Avg 0.02% -0.14% 0.17% 0.24% 0.41% 0.69%
Win% 69% 47% 57% 64% 76% 64%
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 0.44% 0.60% 0.31% -0.23% 0.29% 1.41%
1960-4 0.00% -0.07% -0.14% 0.53% 0.24% 0.56%
1964-4 -0.06% -0.30% 0.34% 0.36% 0.44% 0.78%
1968-4 -0.08% -0.55% 0.00% -0.26% -0.97% -1.85%
1972-4 -0.53% -0.73% -0.40% -0.57% 0.49% -1.75%
1976-4 0.00% -0.55% 0.28% 0.14% 0.96% 0.84%
1980-4 1.84% -0.59% 0.28% 1.51% 0.49% 3.53%
1984-4 0.74% -0.31% -1.52% -0.35% 0.57% -0.88%
Avg 0.49% -0.54% -0.34% 0.10% 0.31% -0.02%
1988-4 0.00% 1.48% -1.37% -0.09% -0.65% -0.63%
1992-4 0.06% 0.68% -0.14% 0.11% -0.46% 0.24%
1996-4 -0.75% 0.34% 0.20% -1.59% 0.08% -1.71%
2000-4 -0.22% 0.36% 0.81% 0.19% 0.95% 2.09%
2004-4 0.00% -0.81% 0.19% -0.82% 0.33% -1.12%
Avg -0.30% 0.41% -0.06% -0.44% 0.05% -0.22%
SPX summary for Presidential Year 4 1956 - 2004
Avg 0.16% -0.03% -0.10% -0.08% 0.21% 0.12%
Win% 44% 38% 58% 46% 77% 54%
SPX summary for all years 1953 - 2007
Avg -0.03% -0.03% 0.13% 0.11% 0.27% 0.47%
Win% 59% 45% 56% 59% 67% 64%

Conclusion

The market is as oversold as it has been at any time in the last 10 years. A bounce is likely and it could be of significant magnitude. Following the bounce a retest of the current low is likely.

I expect the major indices to be higher on Friday July 10 than they were on Friday June 3.

Last weeks positive forecast based on an oversold market hitting support 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