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
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Stock Markets Oversold But More Downside Expected

Stock-Markets / US Stock Markets Nov 11, 2007 - 01:19 AM GMT

By: Mike_Burk

Stock-Markets

The good news is: · The blue chip decline is accelerating which suggests we are approaching at least an intermediate term low.

Short Term
This year there have been 3 sharp declines, the first in late February – early March the second in Late July – early August and last week.


Over the year to date the NASDAQ composite (OTC) and its big tech subset the NDX have been the strongest of the major indices up 10.34% and 15.79% YTD respectively.

The chart below covers this year showing the NDX in red and an indicator showing the percentage of the last 3 trading days that were up in black. The indicator hits the top of the chart when there have been 3 consecutive up days and it hits the bottom of the chart when there have been 3 consecutive down days.

YTD so far the NDX has not declined for more than 3 days consecutively and Friday was the 3rd. Unless things are different this time the market should rally for a day or two.

Intermediate Term

When forming a bottom and there a lot of new lows (lets say more than 400) as prices decline there is usually a retest of the old low (a return of prices to near the previous low) with fewer new lows.

On August 16 there were 1132 NYSE new lows, close to a record.

On Friday the Dow Jones Industrial Average (DJIA) closed 1.5% above its August low (close enough to be called a retest) and there were 434 new lows. 434 new lows is a lot, but also a lot fewer than 1132.

In 1990 there were a high number of new lows on the retest and that was followed by another retest each at progressively lower prices.

The chart below covers the past 6 months showing the DJIA in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in maroon. NY NL has been plotted on an inverted Y axis so increasing new lows moves the indicator downward (up is good).

At this point the chart above looks encouraging in that the indicator is well above its August lows while the DJIA is approaching its previous low.

For bottom picking you want to see NYNL moving sharply upward for 5 consecutive days. The current value of the indicator is 214 so you want to see significantly fewer new lows than that for 5 consecutive days.

There is a problem with looking for a bottom at this point and that is the DJIA hit an all time high between the lows and that has never happened before.

It is easier to make a case for a developing top where you would expect the blue chips to be making new highs while the secondaries faded and new highs declined.

The next chart shows what has happened since the all time highs in most of the major indices in July. The chart shows the S&P 500 (SPX), the S&P mid cap (MID) and the Russell 2000 (R2K). The Y axis has been scaled logarithmically so you can see the relative performance of the indices. The SPX hit an all time high in early October while the MID and R2K did not and the R2K is still leading the way down.

The next chart covers the past year showing the DJIA in red and a 10% trend of NYSE new highs (NY NH) in green. NY NH has had progressively lower highs as the DJIA has had progressively higher highs.

I think there is likely to be a tradable rally before the August lows have been significantly penetrated. But, this will be a developing top until the secondaries begin outperforming the blue chips and new highs begin to make progressively higher highs.

Seasonality

Next week is the week prior to the 3rd Friday of November during the 3 rd year of the Presidential Cycle.

The tables show the daily change of the OTC and S&P 500 (SPX) in the week prior to the 3 rd Friday of November during the 3 rd year of the Presidential Cycle. OTC data covers the period from 1963 – 2003 and SPX data from 1953 – 2003. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 3 rd year of the Presidential Cycle and all years combined.

Over all years average returns for the week have been modestly positive.

During the 3rd year of the Presidential Cycle both the OTC and SPX have been up a little less than half of the time and the returns have been modestly negative.

Report for the week before the 3rd Friday of November
The number following the year is the position in the presidential cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1963-3 0.48% 0.17% -0.06% 0.20% -0.45% 0.34%
1967-3 0.24% -0.10% -0.25% 0.67% 1.04% 1.59%
1971-3 -0.45% 0.26% -0.07% -0.19% -0.47% -0.93%
1975-3 0.15% -0.61% -0.95% -0.26% 0.09% -1.58%
1979-3 0.88% 0.07% 0.45% 0.84% 0.11% 2.34%
1983-3 0.86% -0.21% 0.37% 0.47% 0.01% 1.49%
Avg 0.33% -0.12% -0.09% 0.31% 0.15% 0.58%
1987-3 -0.19% -1.74% 0.46% -1.35% -0.46% -3.27%
1991-3 0.48% 0.90% 0.09% -0.24% -4.24% -3.01%
1995-3 -0.51% -1.69% 0.12% 0.25% 0.05% -1.78%
1999-3 -0.05% 2.29% -0.73% 2.39% 0.66% 4.56%
2003-3 -1.07% -1.46% 0.95% -0.93% 0.64% -1.88%
Avg -0.27% -0.34% 0.18% 0.02% -0.67% -1.08%
OTC summary for Presidential Year 3 1963 - 2003
Avg 0.07% -0.19% 0.04% 0.17% -0.28% -0.19%
Win% 55% 45% 55% 55% 64% 45%
OTC summary for all years 1963 - 2006
Avg -0.07% 0.06% 0.12% 0.19% -0.09% 0.21%
Win% 49% 50% 61% 59% 52% 57%
SPX Presidential Year 3
Year Mon Tue Wed Thur Fri Totals
1955-3 2.59% -0.43% -0.65% -0.70% -0.11% 0.70%
1959-3 -1.11% 0.28% 1.08% -0.09% 0.05% 0.22%
1963-3 0.22% -0.39% 0.08% -0.46% -0.82% -1.38%
1967-3 -0.26% -0.63% 0.40% 0.92% 0.24% 0.67%
1971-3 -0.34% 0.98% 0.15% -0.78% -0.56% -0.55%
1975-3 0.54% -0.50% -1.12% -0.38% -0.12% -1.59%
1979-3 1.97% -0.55% 0.44% 0.72% -0.33% 2.25%
1983-3 0.17% -0.73% 0.44% 0.03% -0.63% -0.72%
Avg 0.42% -0.29% 0.06% 0.10% -0.28% 0.01%
1987-3 0.46% -1.51% 1.03% -2.24% 0.81% -1.45%
1991-3 0.06% 0.92% 0.17% -0.07% -3.66% -2.58%
1995-3 -0.07% -0.51% 0.79% 0.57% 0.46% 1.24%
1999-3 -0.12% 1.84% -0.66% 1.01% -0.21% 1.86%
2003-3 -0.64% -0.91% 0.80% -0.84% 0.16% -1.43%
Avg -0.06% -0.03% 0.43% -0.31% -0.49% -0.47%
SPX summary for Presidential Year 3 1955 - 2003
Avg 0.27% -0.16% 0.23% -0.18% -0.36% -0.21%
Win% 54% 31% 77% 38% 38% 46%
SPX summary for all years 1953 - 2006
Avg 0.03% -0.05% 0.11% 0.09% 0.01% 0.19%
Win% 47% 44% 67% 52% 60% 54%

 

Money Supply
Gordon Harms will be providing his report no more than once a month in the future, however he has agreed to provide the M2 money supply chart.

Mutual Fund
Compliance issues demand that I not mention the mutual fund that I manage by name or symbol in this letter.

To see a current chart of the fund go to: http://finance.yahoo.com/q/bc ?s=APHAX&t=6m&l=on&z=m&q=l&c =

For information about the fund go to: http://www.thealphafunds.com /index.htm

The fund now has service class shares available.

Conclusion
The market is oversold, but the indicators provide no suggestion of a bottom.

I expect the major indices to be lower on Friday November 16 than they were on Friday November 9.

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

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