Technical Market Report For February 9

The good news is:

• The Dow Jones Industrial Average (DJA), S&P 500 (SPX) and NASDAQ composite (COMP) all hit new all time highs last Thursday.

The Negatives

Last Thursday’s highs were NOT confirmed by the breadth indicators.

The small caps represented by the Russell 2000 (IWM) had a good week, but did NOT hit an all time high along with the large cap indices.

The first chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH did NOT confirm the new high in the SPX.

The next chart is similar to the one above except it shows the OTC in blue and OTC NH, in green, has been calculated with NASDAQ data.

OTC NH failed to confirm the index high by a large margin.

The Positives

All time index highs are a positive.

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 recovered to a comfortable 67%.

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 also rose finishing the week at strong 82%.

I consider the HL ratio indicators indicative of what the market is doing.

I do not consider them predictive.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of February 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 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 mixed.  

Report for the week before the 2nd Friday of February.

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

Daily returns from Monday to 2nd Friday.

OTC Presidential Year 4 (PY4)

 Year Mon Tue Wed Thur FriTotals

 1964-4 0.08% 0.05% 0.16% 0.24% -0.16% 0.38%

 1968-4-0.20% -0.26% 0.10% 0.21% -1.40%-1.55%

 1972-4-0.08% 0.17% 0.67% 0.45% 0.12% 1.33%

 1976-4 0.66% 0.14% 0.84% 0.21% 0.09% 1.95%

 1980-4-0.17% 0.11% 0.49% 0.48% 0.90% 1.81%

 1984-4-2.03% -0.32%-1.49% -0.89% 0.93%-3.81%

 1988-4-0.36% 0.13% 1.26% 0.49% 0.64% 2.16%

 1992-4-0.13% -0.12% 1.82% -0.90% -0.42% 0.25%

 1996-4 1.04% 0.54%-0.39% 0.77% 0.13% 2.09%

 Avg -0.33% 0.07% 0.34% -0.01% 0.44% 0.50%

 2000-4 1.83% 2.45%-1.46% 2.81% -2.01% 3.62%

 2004-4-0.17% 0.72% 0.69% -0.77% -0.97%-0.49%

 2008-4-1.26% -3.08%-1.33% 0.63% 0.52%-4.53%

 2012-4-0.13% 0.07% 0.41% 0.39% -0.80%-0.06%

 2016-4-1.82% -0.35% 0.35% -0.39% 1.66%-0.56%

 Avg -0.31% -0.04%-0.27% 0.53% -0.32%-0.40%

OTC summary for PY4 1964 - 2016 

 Avg -0.20% 0.02% 0.15% 0.27% -0.05% 0.19%

 Win% 29% 64% 71% 71% 57% 57%

OTC summary for all years 1963 - 2019

 Avg -0.18% 0.03% 0.06% 0.18% 0.04% 0.14%

 Win% 38% 58% 56% 67% 61% 58%

 

SPX PY4

 Year Mon Tue Wed Thur FriTotals

 1956-4 0.07% -0.47%-0.99% -1.13% -0.05%-2.57%

 1960-4-1.18% 0.94%-0.63% -0.56% 0.51%-0.92%

 1964-4-0.17% 0.36% 0.31% -0.06% -0.05% 0.39%

 1968-4-0.43% 0.03% 0.17% -1.26% -1.14%-2.63%

 1972-4-0.31% 0.19% 0.77% 0.04% -0.48% 0.21%

 1976-4 0.16% 0.85% 0.30% -0.52% -0.58% 0.22%

 Avg -0.39% 0.48% 0.19% -0.47% -0.35%-0.55%

 1980-4-0.65% 0.25% 0.92% 0.48% 1.44% 2.45%

 1984-4-1.76% 0.42%-1.82% -0.28% 0.57%-2.87%

 1988-4-0.74% 1.05% 1.96% -0.28% 0.66% 2.65%

 1992-4 0.65% 0.00% 0.81% -0.82% -0.29% 0.35%

 1996-4 0.88% 0.76% 0.56% 0.94% 0.05% 3.19%

 Avg -0.32% 0.50% 0.49% 0.01% 0.48% 1.15%

 2000-4-0.10% 1.32%-2.09% 0.36% -2.10%-2.60%

 2004-4-0.26% 0.50% 1.07% -0.49% -0.55% 0.28%

 2008-4-1.05% -3.20%-0.76% 0.79% -0.42%-4.64%

 2012-4-0.04% 0.20% 0.22% 0.15% -0.69%-0.17%

 2016-4-1.42% -0.07%-0.02% -1.23% 1.95%-0.78%

 Avg -0.57% -0.25%-0.32% -0.08% -0.36%-1.58%

SPX summary for PY4 1956 - 2016 

 Avg -0.40% 0.20% 0.05% -0.24% -0.07%-0.46%

 Win% 25% 75% 63% 38% 38% 50%

SPX summary for all years 1953 - 2019

 Avg -0.30% -0.04% 0.10% -0.05% 0.08%-0.20%

 Win% 37% 52% 57% 44% 55% 57%

Conclusion

The new highs were unconfirmed by breadth.

Utilities and Transportation were the strongest sectors while energy remained near the bottom and was joined by precious metals which fell from the top to the bottom in a week.

I expect the major averages to be lower on Friday, February 14 than they were on Friday, February 7.