Technical Market Report For April 29, 2017
The good news is the NASDAQ composite (OTC) and the Russell 2000 (R2K) both hit all time highs last week. The market had another good week.
New highs increased, new lows remained insignificant, while the secondaries outperformed the blue chips and volume picked up.
The Negatives
The market is over bought. The major indices are up 2.5% - 4.5% in the past 2 weeks.
The first chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.
OTC NH moved sharply upward last week, but was far from confirming the new index high.
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.
The pattern is similar to the chart above.
The Positives
The secondaries outperformed the blue chips and new lows remained at non threatening levels.
The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.
OTC HL Ratio rose finishing the week at a very strong 81%.
The next chart is similar to the one above one except it shows the SPX in red and NY HL Ratio, in blue, has been calculated from NYSE data.
NY HL Ratio rose to finish the week at a very strong 89%.
Seasonality
Next week includes the first 5 trading days of May during the 1st year of the Presidential Cycle. The tables below show the daily change, on a percentage basis for that period.
OTC data covers the period from 1963 to 2016 while SPX data runs from 1928 to 2016. There are summaries for both the 1st year of the Presidential Cycle and all years combined. Average returns for the coming week have been much stronger during the 1st year of the Presidential Cycle than average of all years.
The OTC has not had a down year for this period since 1981 and the SPX since 1989.
Report for the first 5 days of May.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.
| OTC Presidential Year 1 | ||||||
| Day1 | Day2 | Day3 | Day4 | Day5 | Totals | |
| 1965-1 | 0.27% 1 | -0.04% 2 | 0.31% 3 | 0.04% 4 | 0.13% 5 | 0.72% |
| 1969-1 | 0.26% 4 | 0.12% 5 | 0.34% 1 | 0.19% 2 | -0.38% 3 | 0.53% |
| 1973-1 | 0.10% 2 | 1.01% 3 | 0.70% 4 | 0.98% 5 | -0.37% 1 | 2.42% |
| 1977-1 | 0.37% 1 | 0.40% 2 | 0.44% 3 | 0.27% 4 | 0.01% 5 | 1.48% |
| 1981-1 | -0.03% 5 | -1.55% 1 | -0.83% 2 | 0.20% 3 | 0.79% 4 | -1.41% |
| 1985-1 | -0.33% 3 | -0.22% 4 | 0.47% 5 | -0.16% 1 | 0.37% 2 | 0.12% |
| 1989-1 | -0.02% 1 | 0.13% 2 | 0.19% 3 | 0.09% 4 | 0.35% 5 | 0.74% |
| 1993-1 | 0.80% 1 | 1.72% 2 | 0.75% 3 | -0.47% 4 | 0.21% 5 | 3.00% |
| Avg | 0.16% | 0.09% | 0.20% | -0.01% | 0.35% | 0.79% |
| 1997-1 | 0.77% 4 | 2.74% 5 | 2.60% 1 | -0.81% 2 | -0.41% 3 | 4.89% |
| 2001-1 | 2.46% 2 | 2.42% 3 | -3.35% 4 | 2.11% 5 | -0.82% 1 | 2.82% |
| 2005-1 | 0.36% 1 | 0.23% 2 | 1.51% 3 | -0.02% 4 | 0.28% 5 | 2.36% |
| 2009-1 | 0.11% 5 | 2.58% 1 | -0.54% 2 | 0.28% 3 | -2.44% 4 | 0.00% |
| 2013-1 | -0.89% 3 | 1.26% 4 | 1.14% 5 | 0.42% 1 | 0.11% 2 | 2.04% |
| Avg | 0.56% | 1.84% | 0.27% | 0.40% | -0.65% | 2.42% |
| OTC summary for Presidential Year 1 1965 - 2013 | ||||||
| Averages | 0.33% | 0.83% | 0.29% | 0.24% | -0.17% | 1.52% |
| % Winners | 69% | 77% | 77% | 69% | 62% | 92% |
| MDD 5/3/2001 3.35% -- 5/7/2009 2.68% -- 5/5/1981 2.39% | ||||||
| OTC summary for all years 1963 - 2016 | ||||||
| Averages | 0.33% | 0.16% | 0.02% | -0.08% | -0.08% | 0.35% |
| % Winners | 64% | 69% | 58% | 54% | 56% | 61% |
| MDD 5/7/2010 9.33% -- 5/7/2002 6.78% -- 5/3/2000 6.34% | ||||||
| SPX Presidential Year 1 | ||||||
| Day1 | Day2 | Day3 | Day4 | Day5 | Totals | |
| 1929-1 | 0.19% 3 | 0.46% 4 | 1.00% 5 | 0.42% 6 | -0.60% 1 | 1.46% |
| 1933-1 | 1.32% 1 | 0.36% 2 | -0.59% 3 | 2.85% 4 | 1.04% 5 | 4.98% |
| 1937-1 | 0.00% 6 | 0.24% 1 | 1.58% 2 | -0.84% 3 | 0.72% 4 | 1.71% |
| 1941-1 | -0.11% 4 | 0.32% 5 | 0.21% 6 | -0.11% 1 | 1.71% 2 | 2.04% |
| 1945-1 | -0.34% 2 | -0.14% 3 | 0.68% 4 | 0.34% 5 | 0.20% 6 | 0.74% |
| 1949-1 | 0.27% 1 | 0.47% 2 | 1.14% 3 | -0.07% 4 | -0.60% 5 | 1.22% |
| 1953-1 | 0.45% 5 | 1.09% 1 | 0.12% 2 | -0.12% 3 | -0.40% 4 | 1.14% |
| Avg | 0.05% | 0.40% | 0.75% | -0.16% | 0.33% | 1.37% |
| 1957-1 | 0.61% 3 | 0.80% 4 | -0.11% 5 | -0.15% 1 | -0.30% 2 | 0.85% |
| 1961-1 | -0.21% 1 | 0.72% 2 | 0.82% 3 | 0.39% 4 | 0.12% 5 | 1.84% |
| 1965-1 | 0.13% 1 | 0.31% 2 | 0.22% 3 | 0.23% 4 | -0.08% 5 | 0.83% |
| 1969-1 | -0.17% 4 | 0.47% 5 | 0.36% 1 | 0.47% 2 | -0.18% 3 | 0.94% |
| 1973-1 | 0.12% 2 | 1.24% 3 | 1.65% 4 | 0.71% 5 | -0.42% 1 | 3.30% |
| Avg | 0.10% | 0.71% | 0.59% | 0.33% | -0.17% | 1.55% |
| 1977-1 | 0.50% 1 | 0.51% 2 | 0.53% 3 | 0.15% 4 | -0.62% 5 | 1.07% |
| 1981-1 | -0.07% 5 | -1.54% 1 | -0.27% 2 | 0.35% 3 | 0.68% 4 | -0.85% |
| 1985-1 | -0.81% 3 | 0.36% 4 | 0.60% 5 | -0.05% 1 | 0.43% 2 | 0.52% |
| 1989-1 | -0.17% 1 | -0.32% 2 | 0.01% 3 | -0.13% 4 | -0.05% 5 | -0.66% |
| 1993-1 | 0.52% 1 | 0.36% 2 | 0.11% 3 | -0.28% 4 | -0.21% 5 | 0.48% |
| Avg | -0.01% | -0.13% | 0.20% | 0.01% | 0.04% | 0.11% |
| 1997-1 | -0.35% 4 | 1.81% 5 | 2.13% 1 | -0.31% 2 | -1.47% 3 | 1.82% |
| 2001-1 | 1.36% 2 | 0.08% 3 | -1.49% 4 | 1.44% 5 | -0.24% 1 | 1.15% |
| 2005-1 | 0.46% 1 | -0.09% 2 | 1.25% 3 | -0.26% 4 | -0.11% 5 | 1.25% |
| 2009-1 | 0.54% 5 | 3.39% 1 | -0.38% 2 | 1.74% 3 | -1.32% 4 | 3.97% |
| 2013-1 | -0.93% 3 | 0.94% 4 | 1.05% 5 | 0.19% 1 | 0.52% 2 | 1.78% |
| Avg | 0.21% | 1.23% | 0.51% | 0.56% | -0.52% | 1.99% |
| SPX summary for Presidential Year 1 1929 - 2013 | ||||||
| Averages | 0.15% | 0.54% | 0.48% | 0.32% | -0.05% | 1.44% |
| % Winners | 55% | 82% | 77% | 55% | 36% | 91% |
| MDD 5/5/1981 1.87% -- 5/7/1997 1.77% -- 5/3/2001 1.49% | ||||||
| SPX summary for all years 1928 - 2016 | ||||||
| Averages | 0.12% | 0.16% | 0.19% | -0.06% | 0.14% | 0.55% |
| % Winners | 55% | 68% | 63% | 44% | 49% | 66% |
| MDD 5/3/1930 8.27% -- 5/7/2010 7.60% -- 5/4/2000 4.01% | ||||||
May trading
Since 1963, over all years, the OTC in May has been up 61% of the time with an average gain of 0.6%. During the 1st year of the Presidential Cycle the OTC in May has been up 77% of the time with an average gain of 2.7% (helped considerably by a 11.1% gain in 1997). The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).
The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.
In the chart below the blue line shows the average daily performance of the OTC in May over all years since 1963, while the green line shows the average during the 1st year of the Presidential Cycle over the same period.
Since 1928 the SPX has been up 57% of the time in May with an average loss of 0.1%. During the 1st year of the Presidential Cycle the SPX has been up 59% of the time with an average gain of 1.6%. The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).
The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in May in red and the average daily performance during the 1st year of the Presidential Cycle, over the same period, in green.
Since 1979 the Russell 2000 (R2K) has been up 66% of the time in May with an average gain of 1.4%. During the 1st year of the Presidential Cycle the R2K has been up 100% of the time with an average gain of 4.6%. The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)
The chart below is similar to those above except it shows the average daily performance of the R2K over all years since 1979 in magenta and the average daily performance during the 1st year of the Presidential Cycle in green.
Since 1885 the Dow Jones Industrial Average (DJIA) has been up 52% of the time in May with an average loss of -0.1%. During the 1st year of the Presidential Cycle the DJIA has been up 58% of the time in May with an average gain of 0.9%. The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)
The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in May in grey and the average performance during the 1st year of the Presidential Cycle in green.
Conclusion
The market continued its rally last week and seasonally next week is strong.
I expect the major averages to be higher on Friday May 5 than they were on Friday April 28.
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