Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Markets Expected to Consolidate After Strong Rally

Stock-Markets / US Stock Markets May 16, 2009 - 07:08 PM GMT

By: Mike_Burk

Stock-Markets

Best Financial Markets Analysis ArticleThe good news is: In spite of a pretty rough week for the major indices there were no new lows to speak of on either the NYSE or NASDAQ.

Short Term I have often stated that the secondaries lead both up and down.


The Russell 2000 (R2K) index of small cap issues led the way up from the early March low and now appears to be leading the way down.

The first chart covers the period from the March lows through last Friday showing the major indices on semi log scales to show their relative performance. Dashed vertical lines have been drawn on the 1st trading day of each week and slightly darker lines have been drawn on the 1st trading day of each month.

The R2K shown in green led the way up while the Dow Jones Industrial Average (DJIA) shown in magenta was the laggard. The NASDQ composite (OTC) shown in blue was 2nd to the R2K followed by the S&P 500 (SPX) shown in red.

The next chart is similar to the previous one except it covers the last 2 weeks. This chart shows that the upward leaders have become the downward leaders.

A common topping pattern you should look for is a return to new highs by the blue chip indices, but, not the secondaries. If this pattern plays out, it should happen in the next month.

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 a couple weeks, it covers the past year showing the 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.

The indicator took a hit last week, but is still above the 50% level.

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 took a much more severe hit last week and is at 18%, a level that would suggest caution.

Seasonality

Next week includes the week prior to the 4th Friday in May during the 1st year of the Presidential Cycle.

The tables show the daily return on a percentage basis for the week prior to the 4th Friday of May during the 1st year of the Presidential Cycle. OTC data covers the period from 1963 - 2008 and SPX data from 1953 - 2008. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 1st year of the Presidential Cycle and all years combined.

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

Report for the week before the 4th Friday of May. The number following the year is the position in the presidential cycle. Daily returns from Monday through the 4th Friday.

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 -0.33% -0.73% 0.60% -0.83% -0.36% -1.65%
 
1969-1 -0.53% -0.40% -0.15% 0.23% 0.54% -0.31%
1973-1 -2.07% 0.82% 0.49% 2.14% 0.86% 2.24%
1977-1 -0.87% -0.50% -0.50% -0.01% -0.28% -2.16%
1981-1 0.20% -0.38% 0.70% 0.33% 0.40% 1.25%
1985-1 0.95% -0.18% -0.31% -0.30% 0.00% 0.16%
Avg -0.46% -0.13% 0.05% 0.48% 0.30% 0.24%
 
1989-1 -0.06% -0.37% 0.30% 0.32% 0.52% 0.72%
1993-1 0.06% 0.05% 1.30% 0.07% -0.58% 0.90%
1997-1 0.04% 1.69% 0.73% -0.09% 1.25% 3.61%
2001-1 4.85% 0.36% -3.04% 1.72% -1.36% 2.53%
2005-1 0.50% 0.24% -0.56% 1.03% 0.22% 1.43%
Avg 1.08% 0.40% -0.25% 0.61% 0.01% 1.84%
 
OTC summary for Presidential Year 1 1965 - 2005
Avg 0.25% 0.06% -0.04% 0.42% 0.11% 0.79%
Win% 55% 45% 55% 64% 55% 73%
 
OTC summary for all years 1963 - 2008
Avg -0.19% -0.21% 0.03% 0.12% 0.14% -0.11%
Win% 44% 41% 57% 59% 64% 54%
 
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.36% -0.20% 0.93% 0.52% -0.12% 0.77%
1957-1 0.25% 0.13% -0.40% 0.02% 0.13% 0.13%
1961-1 -0.62% -0.25% -0.63% -0.38% 0.64% -1.25%
1965-1 -0.74% 0.58% -0.34% -0.52% 0.66% -0.36%
 
1969-1 -0.92% -0.89% 0.41% 0.12% -0.01% -1.27%
1973-1 -1.09% 0.83% 0.47% 2.95% 0.75% 3.91%
1977-1 -1.31% -0.49% -0.92% 0.25% -0.76% -3.23%
1981-1 0.28% -0.34% -0.07% -0.19% -0.32% -0.64%
1985-1 1.23% -0.04% -0.57% -0.51% 0.37% 0.47%
Avg -0.36% -0.19% -0.13% 0.52% 0.00% -0.15%
 
1989-1 0.23% -1.14% 0.26% 0.01% 0.76% 0.12%
1993-1 0.48% 0.19% 1.02% -0.23% -0.49% 0.98%
1997-1 0.42% 1.01% -0.27% -0.44% 1.36% 2.08%
2001-1 1.62% -0.26% -1.55% 0.32% -1.18% -1.06%
2005-1 0.39% 0.02% -0.34% 0.64% 0.10% 0.80%
Avg 0.63% -0.04% -0.18% 0.06% 0.11% 0.58%
 
SPX summary for Presidential Year 1 1953 - 2005
Avg -0.01% -0.06% -0.14% 0.18% 0.13% 0.10%
Win% 57% 43% 36% 57% 57% 57%
 
SPX summary for all years 1953 - 2009
Avg -0.15% -0.14% -0.11% 0.02% 0.11% -0.28%
Win% 45% 45% 49% 53% 64% 54%

Money supply (M2)

The chart below was provided by Gordon Harms. In spite of heroic efforts by the Fed, M2 growth has been falling.

Conclusion

I think the market is likely to consolidate for a week or two with the blue chips holding up better than the secondaries, followed by a run to new highs by the blue chips, but not the secondaries.

I expect the major indices to be lower on Friday May 22 than they were on Friday May 15.

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

© 2005-2022 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