Technical Market Report For March 7

The good news is when the market declines in a panic it usually recovers quickly.

The Negatives

The end of this decline, when it comes, will be signaled by a rapid decline in the number of new lows. We have NOT seen that.

The first chart covers the past six months showing the NASDAQ composite (OTC) 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 continued its fall, but, is a long way from the level hit in late December 2018.

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

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 at 17% cannot get much worse.

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 at 9% does not have room to get much worse.

The Positives

The buy the dips crowd and Plunge Protection Team (PPT) AKA the working group on Financial Markets were out in force last week.

Volume of ADVANCING issues was the strongest ever last week.

The chart below covers the past 6 months showing the OTC in blue and a 5% trend (39 day EMA) of volume of advancing issues (OTC UV 5%) in green.

OTC UV 5% hit its highest level ever last week.

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

Dashed vertical lines have been drawn on the first trading day of each year.

Seasonality

Next week includes the five trading days prior to the 2nd Friday 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 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.  

Given the current panic, seasonal averages are not relevant.

Report for the week before the second Friday of March

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 0.61% -0.05% 0.32% -0.24% 0.24% 0.88%

 1968-4-0.63% 0.59%-3.92% 1.27% -0.15%-2.84%

 1972-4 0.54% -0.04% 0.45% 0.35% -0.23% 1.07%

 1976-4 0.56% 0.01% 0.24% 1.12% -0.24% 1.69%

 1980-4-1.67% 0.56% 0.05% 0.24% -0.37%-1.19%

 1984-4-0.66% -0.64%-1.22% 0.20% -0.26%-2.58%

 1988-4 0.32% 0.64% 0.89% -0.93% -0.34% 0.58%

 1992-4-0.02% 1.24%-1.01% -0.20% 0.44% 0.45%

 1996-4-0.11% 1.10%-0.46% 0.12% -2.69%-2.04%

 Avg -0.43% 0.58%-0.35% -0.11% -0.64%-0.96%

 2000-4-0.20% -1.16% 1.02% 3.06% 0.03% 2.74%

 2004-4-1.90% -0.68%-1.55% -1.03% 2.10%-3.06%

 2008-4-1.95% 3.98%-0.53% 0.88% -2.26% 0.13%

 2012-4-0.86% -1.36% 0.87% 1.18% 0.60% 0.43%

 2016-4-0.19% -1.26% 0.55% -0.26% 1.85% 0.69%

 Avg -1.02% -0.10% 0.07% 0.77% 0.47% 0.19%

OTC summary for PY4 1964 - 2016 

 Avg -0.44% 0.21%-0.31% 0.41% -0.09%-0.22%

 Win% 29% 50% 57% 64% 43% 64%

OTC summary for all years 1963 - 2019

 Avg -0.04% 0.31% 0.02% 0.28% -0.01% 0.55%

 Win% 46% 55% 61% 65% 53% 67%

 

SPX PY4

 Year Mon Tue Wed Thur FriTotals

 1956-4 0.55% -0.04%-0.07% 0.24% 1.26% 1.93%

 1960-4-1.01% -1.02% 1.07% -0.39% 0.76%-0.59%

 1964-4 0.03% 0.33% 0.46% 0.16% 0.08% 1.06%

 1968-4-1.34% -0.23% 1.76% -0.18% -0.08%-0.07%

 1972-4 0.77% 0.09% 0.08% -0.02% -0.52% 0.40%

 1976-4 1.09% 0.39% 0.36% 0.94% -1.01% 1.77%

 Avg -0.09% -0.09% 0.74% 0.10% -0.16% 0.51%

 1980-4-0.36% 1.19%-0.84% -1.17% -0.18%-1.37%

 1984-4-0.85% -1.04%-1.08% 0.40% -0.54%-3.10%

 1988-4 0.03% 0.77%-0.14% -1.94% 0.42% -0.86%

 1992-4 0.19% 0.41%-0.70% -0.03% 0.48% 0.35%

 1996-4 1.00% 0.77%-0.58% 0.25% -3.08%-1.64%

 Avg0.00% 0.42%-0.67% -0.50% -0.58%-1.32%

 2000-4-1.27% -2.57% 0.82% 2.56% -0.47%-0.93%

 2004-4-0.84% -0.58%-1.46% -1.52% 1.25%-3.15%

 2008-4-1.55% 3.71%-0.90% 0.51% -2.08%-0.30%

 2012-4-0.39% -1.54% 0.69% 0.98% 0.36% 0.11%

 2016-4 0.09% -1.12% 0.51% 0.02% 1.64% 1.12%

 Avg -0.79% -0.42%-0.07% 0.51% 0.14%-0.63%

SPX summary for PY4 1956 - 2016 

 Avg -0.24% -0.03% 0.00% 0.05% -0.11%-0.33%

 Win% 50% 50% 50% 56% 50% 44%

SPX summary for all years 1953 - 2019

 Avg -0.03% 0.18% 0.05% 0.16% 0.00% 0.36%

 Win% 52% 54% 54% 62% 47% 58%

Conclusion

There has been NO sign of a bottom.

The strongest sectors were Utilities and Biotech; the weakest were Banks and Energy.

I expect the major averages to be lower on Friday, March 13, than they were on Friday March 6. 

Lasts week the Russell 2000 was down while the other indices were up; so I am calling last week's negative forecast a tie.