Technical Market Report For February 15

For last week the good news is:

• The Dow Jones Industrial Average (DJIA), S&P 500 (SPX) and NASDAQ composite (OTC) all hit new all-time highs last week.

The Negatives

Last weeks new OTC highs were NOT confirmed by the breadth indicators.

The small caps represented by the Russell 2000 (R2K) had another good week, but did NOT hit an all time high.

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 failed to confirm the index high by a large margin.

 

The Positives

All time index highs are a positive.

The next chart is similar to the one above except it shows the SPX in red and NY NH, in green, has been calculated with NYSE data.

NY NH confirmed the new SPX high Friday. The implication is higher highs.

The next chart covers the past six 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 to a strong 78%.

The next chart is similar to the one above except it shows the SPX in red and NY HL Ratio, in blue, has been calculated with NYSE data.

NY HL Ratio rose slightly finishing the week at strong 83%.

Seasonality

Next week includes the four trading days prior to the third Friday of February during the fourth year of the Presidential Cycle. The tables below show the daily change, on a percentage basis, for that period.The market will be closed Monday in observance of Presidents Day.

OTC data covers the period from 1963 to 2018 while SPX data runs from 1953 to 2018.There are summaries for both the 4th 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.

Average returns for the coming week have been positive.  

Report for the week before the 3rd Friday of February.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday through 3rd Friday.

Break down by Presidential Year

OTC Presidential Year 4 (PY4)

 Year Mon Tue Wed Thur FriTotals

 1964-4 0.46% -0.05%-0.05% 0.32% -0.27% 0.41%

 1968-4 0.00% -1.11%-0.91% 0.21% 0.34% -1.47%

 1972-4-0.49% 0.29% 0.60% 0.07% -0.03% 0.44%

 1976-4 0.00% -0.16%-1.79% 3.34% 0.98% 2.36%

 1980-4-0.48% 0.07% 0.25% -0.87% -0.60%-1.63%

 1984-4-1.37% 0.74% 0.12% -0.35% -0.20%-1.06%

 1988-4 0.00% 0.42% 0.15% 0.10% 0.42% 1.09%

 1992-4 0.00% -1.57%-0.64% 1.58% -0.39%-1.03%

 1996-4 0.07% -0.75% 0.07% 0.23% 0.02%-0.35%

 Avg -0.59% -0.22%-0.01% 0.14% -0.15%-0.60%

 2000-4 0.53% 0.05% 0.16% 2.74% -3.02% 0.45%

 2004-4 0.00% 1.30%-0.19% -1.47% -0.39%-0.74%

 2008-4 0.66% 0.00% 2.32% -1.74% -0.46% 0.78%

 2012-4 0.95% 0.02%-0.55% 1.51% -0.27% 1.65%

 2016-4 0.00% 2.27% 2.21% -1.03% 0.38% 3.83%

 Avg0.71% 0.73% 0.79% 0.00% -0.75% 1.19%

OTC summary for PY4 1964 - 2016 

 Avg0.04% 0.11% 0.13% 0.33% -0.25% 0.34%

 Win% 63% 57% 57% 64% 36% 57%

OTC summary for all years 1963 - 2019

 Avg0.14% -0.04% 0.13% 0.18% -0.11% 0.25%

 Win% 61% 52% 60% 63% 49% 61%

 

SPX PY4

 Year Mon Tue Wed Thur FriTotals

 1956-4-0.14% -0.37% 1.43% -0.50% 1.60% 2.02%

 1960-4-0.52% -0.80% 0.55% 1.40% 0.79% 1.42%

 1964-4 0.08% 0.00% 0.24% -0.32% 0.23% 0.23%

 1968-4 0.00% -0.88% 1.20% 0.18% -0.38% 0.12%

 1972-4-0.47% 0.42% 0.56% -0.03% -0.29% 0.19%

 1976-4 0.00% -0.62% 0.81% 1.56% 0.68% 2.43%

 Avg -0.30% -0.47% 0.67% 0.56% 0.21% 0.88%

 1980-4-0.70% 0.67% 0.46% -1.45% -1.12%-2.15%

 1984-4-0.86% 1.07%-0.23% -0.08% -0.25%-0.35%

 1988-4 0.00% 0.85%-0.24% -0.50% 1.43% 1.55%

 1992-4 0.00% -1.24% 0.22% 1.38% -0.59%-0.23%

 1996-4 0.77% -0.14%-0.74% -0.65% -0.51%-1.28%

 Avg -0.26% 0.24%-0.11% -0.26% -0.21%-0.49%

 2000-4 0.20% 0.88%-1.03% 0.04% -3.04%-2.94%

 2004-4 0.00% 0.98%-0.45% -0.41% -0.26%-0.14%

 2008-4 0.59% 0.73% 1.36% -1.34% 0.08% 1.42%

 2012-4 0.68% -0.09%-0.54% 1.10% 0.23% 1.39%

 2016-4 0.00% 1.65% 1.65% -0.47% 0.00% 2.83%

 Avg0.49% 0.83% 0.20% -0.22% -0.60% 0.51%

SPX summary for PY4 1956 - 2016 

 Avg -0.04% 0.21% 0.33% -0.01% -0.09% 0.41%

 Win% 50% 53% 63% 38% 44% 63%

SPX summary for all years 1953 - 2019

 Avg0.10% 0.01% 0.21% 0.00% 0.02% 0.31%

 Win% 50% 58% 60% 49% 49% 61%

 

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

M2 growth leveled off at an accelerated pace.

Interest rates at their close last Friday and their changes from last month:

2yr yield 1.424% down from 1.563%

5yr yield 1.419% down from 1.621%

10yr yield 1.588% down from 1.823%

30yr yield 2.041% down from 2.283%

As of Friday the 2yr & 5yr rates are slightly inverted.

The next chart is a close up showing just the past year from the chart above.

 

Conclusion

The new OTC highs were unconfirmed by breadth while the new blue chip highs were.The confirmation implies higher blue chip highs in the near future.

Utilities and Tech were the strongest sectors while energy and precious metals were the weakest.

I expect the major averages to be higher on Friday February 21 than they were on Friday February 14. 

Lasts weeks negative forecast was a miss.