Technical Market Report for February 29

The good news is:

• When the market declines in a panic it usually recovers quickly.

The Negatives

I have no guess about when this decline will end. It could have ended Friday. The end, when it comes, will be signaled by a rapid decline in the number of new lows.

The first chart covers the past 6 months showing the NASDAQ composite (COMP) in blue and a 10% trend (19 day EMA) 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. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NL is falling rapidly.

The next chart is similar to the one above except it covers the past 2 years so you can see what a recovery looks like. The low was in late December 2018.

The next chart is similar to the first one except it shows the S&P 500 (SPY) in red and NY NL has been calculated from NYSE data.

The next chart is similar to the one above except it covers 2 years so you can see what a recovery looks like.

The Positives

It is a bit of a stretch to call the next charts positive.

They are positive only because they cannot get much worse.

The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ (QQQ) 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 was near the current level in early October and that was a low.At this point there is NO reason to think we are looking at a bottom.

The next chart is similar to the one above except it covers the past 2 years.In late December 2018 OTC HL Ratio fell to just a shade above 0.Any recovery should be considered questionable as long as the indicator remains below the neutral line.

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

NY HL has also fallen hard.

The next chart is similar to the one above except it covers the past 2 years.

In September/October 2018 the HL ratio indicators fell below the neutral line ahead of a price collapse. That did not happen this time.This was not a mature cycle; it was cut short, making a short term recovery more likely.

Seasonality

Next week includes the first 5 trading days of March during the 4th 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 2018 while SPX data runs from 1928 to 2018.There are summaries for both the 4th year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been mixed.  Given the current panic, seasonal averages are probably not relevant.

Report for the first 5 days of March.

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 4 (PY4)

               Day1      Day2      Day3      Day4      Day5      Totals

 1964-4       0.56% 1  -0.05% 2   0.13% 3   0.00% 4   0.32% 5     0.97%

 1968-4      -0.94% 5  -0.63% 1   0.59% 2  -3.92% 3   1.27% 4    -3.62%

 1972-4       0.73% 3   0.23% 4   0.48% 5   0.54% 1  -0.04% 2     1.94%

 1976-4      -0.01% 1   0.32% 2  -0.41% 3  -0.58% 4  -0.20% 5    -0.88%

 1980-4      -0.73% 1  -0.96% 2  -1.56% 3  -2.81% 4  -1.65% 5    -7.71%

 1984-4       0.37% 4   0.80% 5  -0.66% 1  -0.64% 2  -1.22% 3    -1.34%

 1988-4       0.10% 2   0.83% 3   0.44% 4   0.36% 5   0.32% 1     2.05%

 1992-4       0.32% 1  -0.19% 2  -0.62% 3  -1.32% 4  -0.97% 5    -2.79%

 1996-4      -1.27% 5  -0.11% 1   1.10% 2  -0.46% 3   0.12% 4    -0.62%

 Avg         -0.24%     0.08%    -0.26%    -0.97%    -0.68%      -2.08%

 2000-4       1.86% 3  -0.62% 4   3.37% 5  -0.20% 1  -1.16% 2     3.25%

 2004-4       1.38% 1  -0.88% 2  -0.31% 3   1.07% 4  -0.36% 5     0.89%

 2008-4      -0.57% 1   0.07% 2   0.55% 3  -2.30% 4  -0.36% 5    -2.60%

 2012-4       0.74% 4  -0.43% 5  -0.86% 1  -1.36% 2   0.87% 3    -1.04%

 2016-4       2.89% 2   0.29% 3   0.09% 4   0.20% 5  -0.19% 1     3.29%

 Avg          1.26%    -0.31%     0.57%    -0.52%    -0.24%       0.76%

OTC summary for PY4 1964 - 2016

Averages      0.39%    -0.09%     0.17%    -0.81%    -0.23%      -0.59%

% Winners       64%       43%       57%       29%       36%         43%

MDD  3/7/1980  7.49% --  3/6/1968  4.86% --  3/6/1992  3.07%

OTC summary for all years 1963 - 2019

Averages      0.24%     0.03%     0.34%    -0.16%    -0.06%       0.38%

% Winners       64%       51%       68%       54%       48%         61%

MDD 3/7/1980  7.49% --  3/6/2009  6.10% --  3/6/1968  4.86%

SPX PY4

               Day1      Day2      Day3      Day4      Day5      Totals

 1928-4       0.23% 4   0.00% 5   0.69% 6   0.86% 1   0.57% 2     2.36%

 1932-4       0.72% 2   4.31% 3   0.00% 4   0.11% 5   2.98% 6     8.13%

 1936-4       1.51% 1   1.42% 2   0.27% 3   0.13% 4   0.40% 5     3.73%

 1940-4      -0.58% 5   0.17% 6   0.08% 1   0.50% 2   0.74% 3     0.91%

 1944-4       0.42% 3   0.08% 4   0.17% 5   0.00% 6   0.25% 1     0.93%

 1948-4       0.50% 1   0.64% 2   0.07% 3  -0.64% 4   0.21% 5     0.79%

 1952-4       0.09% 6   0.04% 1   1.67% 2   0.13% 3  -0.08% 4     1.85%

 1956-4       0.44% 4   0.59% 5   0.55% 1  -0.04% 2  -0.07% 3     1.47%

 Avg          0.17%     0.31%     0.51%    -0.01%     0.21%       1.19%

 1960-4      -0.20% 2  -0.70% 3  -1.51% 4  -0.38% 5  -1.01% 1    -3.79%

 1964-4       0.22% 1   0.32% 2  -0.19% 3  -0.01% 4   0.32% 5     0.65%

 1968-4      -0.28% 5  -1.34% 1  -0.23% 2   1.76% 3  -0.18% 4    -0.27%

 1972-4       0.73% 3  -0.03% 4   0.58% 5   0.77% 1   0.09% 2     2.14%

 1976-4       0.31% 1   0.54% 2  -0.58% 3  -1.06% 4   0.19% 5    -0.59%

 Avg          0.16%    -0.24%    -0.39%     0.21%    -0.12%      -0.37%

 1980-4      -1.02% 1   0.25% 2  -1.46% 3  -2.23% 4  -1.61% 5    -6.08%

 1984-4       0.72% 4   0.66% 5  -0.85% 1  -1.04% 2  -1.08% 3    -1.58%

 1988-4      -0.22% 2   0.28% 3  -0.04% 4  -0.22% 5   0.03% 1    -0.16%

 1992-4      -0.06% 1   0.10% 2  -0.85% 3  -0.69% 4  -0.51% 5    -2.01%

 1996-4       0.62% 5   1.00% 1   0.77% 2  -0.58% 3   0.25% 4     2.06%

 Avg          0.01%     0.46%    -0.49%    -0.95%    -0.58%      -1.56%

 2000-4       0.94% 3   0.19% 4   1.98% 5  -1.27% 1  -2.57% 2    -0.73%

 2004-4       0.96% 1  -0.59% 2   0.17% 3   0.33% 4   0.17% 5     1.04%

 2008-4       0.05% 1  -0.34% 2   0.52% 3  -2.20% 4  -0.84% 5    -2.81%

 2012-4       0.62% 4  -0.32% 5  -0.39% 1  -1.54% 2   0.69% 3    -0.94%

 2016-4       2.39% 2   0.41% 3   0.35% 4   0.33% 5   0.09% 1     3.57%

 Avg          0.99%    -0.13%     0.53%    -0.87%    -0.49%       0.03%

SPX summary for PY4 1928 - 2016

Averages      0.40%     0.33%     0.08%    -0.30%    -0.04%       0.46%

% Winners       74%       70%       57%       39%       61%         57%

MDD  3/7/1980  5.95% --  3/7/2000  3.80% --  3/7/1960  3.74%

SPX summary for all years 1928 - 2019

Averages      0.18%     0.16%     0.24%     0.09%    -0.01%       0.64%

% Winners       64%       55%       63%       53%       51%         62%

MDD 3/5/2009  7.15% --  3/7/1980  5.95% --  3/6/1942  5.12%

Conclusion

I was in a drug store yesterday and the employee helping me pointed to the empty section of shelving that had held hand sanitizers and said “People are panicking”. There has been no sign of a bottom.

Everything I look at was down except Corporate Bonds. Banks fell the hardest.

I expect the major averages to be lower on Friday March 6, than they were on Friday February 28.