Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

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