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 Market Selloff Relieves Overbought Pressure

Stock-Markets / US Stock Markets Jan 11, 2009 - 08:46 AM GMT

By: Mike_Burk

Stock-Markets

Best Financial Markets Analysis ArticleThe good news is: Although all of the major indices were down substantially last week, new lows hit their lowest levels since November 2006.

Short Term New highs expand in strong markets. Recently we have seen the lowest levels of new highs since late 1987 when there were about half as many issues traded on the NYSE and 20% fewer on the NASDAQ than there are currently.


The chart below covers the past 3 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDQ new highs (OTC NH) in green. The indicator hit a 2 month high on Friday in spite of a sharp decline in prices.

The picture is less encouraging using NYSE data.

The chart below covers the past year showing the S&P 500 (SPX) in red and NY NH calculated from NYSE new highs in green.

NY NH hit its lowest level since late 1987 on Friday.

The secondaries lead both up and down and the NASDAQ is populated with a higher percentage of smaller capitalization issues than the NYSE so some encouragement can be taken from the relative strength in OTC NH.

Intermediate term

New lows fell to single digits last week for the first time since November 2006.

The chart below covers the past year showing the OTC in blue and a 10% trend 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). The indicator is moving sharply upward and just shy of its high point for the year.

The chart below offers another way of looking at the new high - new low data. The chart covers the past year and a half showing the OTC in blue and 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio) in red. Over the past year and a half the indicator spent the longest time under the 50% level since 1978 when the data began being calculated by the current methodology. Current it is slightly above the 50% level.

The chart below is similar to the one above except it covers the past 5 years so you can get a longer term perspective on that indicator.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday in January during the 1st year of the Presidential Cycle. It also includes the 5 trading days prior to the Martin Luther King (MLK) holiday. The MLK holiday was first observed in 1986, however the markets did not close for it until 1998.

There are two sets of tables, the first show the daily return on a percentage basis for the 5 trading days prior to the 3rd Friday in January during the 1st year of the Presidential Cycle while the second shows the daily return during the 5 trading days prior to MLK day. OTC data covers the period from 1963 - 2007 and SPX data from 1953 - 2007. There are summaries for both the 1st year of the Presidential Cycle and all years combined. Prior to 1953 the market traded 6 days a week so that data has been ignored.

By all measures the period has been positive. The average returns have been distorted by extremes in 2001.

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

OTC Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1965-1 0.26% 0.20% 0.09% 0.09% 0.07% 0.70%
1969-1 -0.76% -0.74% -0.16% 0.65% 1.11% 0.10%
1973-1 -0.61% -1.04% -0.42% 0.03% -0.15% -2.19%
1977-1 -0.06% -0.01% 0.43% -0.48% 0.25% 0.13%
1981-1 0.39% -0.20% 0.52% 0.39% 0.64% 1.75%
1985-1 1.28% 0.93% 0.95% 0.35% 0.72% 4.25%
Avg 0.05% -0.21% 0.26% 0.19% 0.52% 0.81%
1989-1 0.07% -0.34% 0.73% 0.57% 0.15% 1.18%
1993-1 0.14% -0.19% 0.09% 0.48% 0.12% 0.64%
1997-1 -0.08% 1.11% -0.89% 0.51% 0.64% 1.29%
2001-1 0.00% -0.30% 2.45% 3.19% 0.07% 5.41%
2005-1 0.00% 0.87% -1.54% -1.34% -0.57% -2.58%
Avg 0.04% 0.23% 0.17% 0.68% 0.08% 1.19%
OTC summary for Presidential Year 1 1965 - 2005
Avg 0.07% 0.03% 0.20% 0.40% 0.28% 0.97%
Win% 56% 36% 64% 82% 82% 82%
OTC summary for all years 1963 - 2008
Avg 0.09% 0.20% 0.13% 0.26% 0.03% 0.70%
Win% 64% 59% 61% 67% 61% 72%
SPX Presidential Year 1
Year Mon Tue Wed Thur Fri Totals
1953-1 -0.84% 0.62% 0.23% 0.19% -0.42% -0.22%
1957-1 -0.69% -1.48% 0.11% -0.02% -1.28% -3.37%
1961-1 -0.03% -0.40% 0.57% 0.15% 0.32% 0.61%
1965-1 0.32% 0.16% -0.03% -0.09% 0.25% 0.61%
1969-1 -0.53% 0.73% 0.48% 0.55% -0.15% 1.09%
1973-1 -0.72% -0.25% 0.46% 0.14% -0.06% -0.43%
1977-1 -0.27% -0.40% 0.51% -0.85% 0.34% -0.66%
1981-1 0.03% -0.17% 0.14% 0.64% 0.34% 0.96%
1985-1 1.55% 0.18% 0.22% -0.27% 0.35% 2.02%
Avg 0.01% 0.02% 0.36% 0.04% 0.16% 0.60%
1989-1 0.10% -0.21% 1.05% 0.13% -0.09% 0.97%
1993-1 -0.07% -0.39% -0.40% 0.49% 0.14% -0.24%
1997-1 0.00% 1.23% -0.22% 0.33% 0.83% 2.18%
2001-1 0.00% 0.63% 0.21% 1.39% -0.40% 1.83%
2005-1 0.00% 0.97% -0.95% -0.78% -0.64% -1.40%
Avg 0.01% 0.45% -0.06% 0.31% -0.03% 0.67%
SPX summary for Presidential Year 1 1953 - 2005
Avg -0.10% 0.09% 0.17% 0.14% -0.03% 0.28%
Win% 42% 50% 71% 64% 50% 57%
SPX summary for all years 1953 - 2008
Avg -0.01% 0.08% 0.02% 0.08% -0.10% 0.07%
Win% 47% 57% 55% 60% 52% 52%
OTC week prior to MLK day in Presidential Year 1
Day5 Day4 Day3 Day2 Day1 Totals
1989-1 0.14% 1 -0.18% 2 0.19% 3 0.44% 4 0.02% 5 0.61%
1993-1 0.77% 1 -0.43% 2 1.08% 3 1.30% 4 0.21% 5 2.92%
1997-1 -0.08% 1 1.11% 2 -0.89% 3 0.51% 4 0.64% 5 1.29%
2001-1 -0.49% 1 1.89% 2 3.40% 3 4.61% 4 -0.53% 5 8.88%
2005-1 0.40% 1 -0.83% 2 0.62% 3 -1.05% 4 0.84% 5 -0.02%
Avg 0.15% 0.31% 0.88% 1.16% 0.23% 2.74%
OTC summary for week prior to MLK day in Presidential Year 1
Averages 0.15% 0.31% 0.88% 1.16% 0.23% 2.74%
%Winners 60% 40% 80% 80% 80% 80%
MDD 1/13/2005 1.26% -- 1/15/1997 .89% -- 1/12/2001 .53%
OTC summary for week prior to MLK day in all years
Averages 0.39% -0.25% 0.11% 0.53% 0.19% 0.97%
%Winners 70% 52% 61% 57% 65% 74%
SPX week prior to MLK day in Presidential Year 1
Day5 Day4 Day3 Day2 Day1 Totals
1989-1 0.11% 1 -0.21% 2 0.58% 3 0.41% 4 0.25% 5 1.14%
1993-1 0.44% 1 0.02% 2 0.46% 3 0.67% 4 0.28% 5 1.87%
1997-1 0.00% 1 1.23% 2 -0.22% 3 0.33% 4 0.83% 5 2.18%
2001-1 -0.19% 1 0.38% 2 0.96% 3 1.03% 4 -0.64% 5 1.54%
2005-1 0.34% 1 -0.61% 2 0.40% 3 -0.86% 4 0.60% 5 -0.13%
Avg 0.14% 0.16% 0.44% 0.32% 0.26% 1.32%
SPX summary for week prior to MLK day in Presidential Year 1
Averages 0.14% 0.16% 0.44% 0.32% 0.26% 1.32%
%Winners 80% 60% 80% 80% 80% 80%
MDD 1/13/2005 1.08% -- 1/12/2001 .64% -- 1/15/1997 .22%
SPX summary for week prior to MLK day in all years
Averages 0.31% -0.21% 0.00% 0.15% 0.31% 0.57%
%Winners 74% 39% 61% 61% 70% 70%

Money Supply

The chart below as provided by Gordon Harms. For the past few weeks money supply has been growing at a sharply accelerated rate.

Conclusion

Last weeks sell off relieved the overbought condition while NASDAQ new highs increased and new lows on both exchanges fell to the lowest levels in years. Seasonally next week has a strong upward bias.

I expect the major indices to be higher on Friday January 16 than they were on Friday January 9.

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