Technical Market Report For April 5
The good news is:
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Sitting at home indefinitely will give you an opportunity to rethink your portfolio strategy.
The Negatives
“There’s No Natural Calamity the Government Can’t Make Worse.”Bill Bonner
As long as the government is demanding economic activity be kept to a minimum every stock market rally will be a head fake.
The first chart covers the past 6 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.
This chart looks good.
Unfortunately there is more to the story.
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.
HL Ratio is not a predictive indicator, but shows what is really happening. As long as this indicator remains below the neutral line the market will be very risky.
The next chart is similar to the 1st one except it shows the S&P 500 (SPX) in red and NY NL in blue, has been calculated with NYSE data.
Look’s good.
Now the rest of the story.
The next chart is similar to the second one except it shows the SPX in red and NY HL Ratio, in blue, has been calculated with NYSE data.
Nothing good here.
The Positives
There will be nothing positive as long as all discretionary economic activity is forbidden.
Seasonality
Next week includes the four trading days prior to Good Friday during the fourth 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 2019 while SPX data runs from 1953 to 2019.There are summaries for both the 4th year of the Presidential Cycle and all years combined.
Historically this has been a pretty good week.
Report for the 4 days before Good Friday
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.
Presidential Year 4 (PY4)
Day4 Day3 Day2 Day1 Totals
1964-4-0.24% 1 -0.13% 2 -0.37% 3 0.27% 4 -0.48%
1968-4 0.19% 5 -0.43% 11.23% 3 1.04% 4 2.03%
1972-4 0.01% 1 0.13% 2 -0.15% 3 0.48% 4 0.46%
1976-4-0.33% 1 0.07% 20.10% 3 0.47% 4 0.32%
1980-4 1.35% 1 1.63% 22.00% 3 0.15% 4 5.14%
1984-4-0.05% 1 0.70% 2 -0.04% 3 0.01% 4 0.62%
1988-4-0.57% 1 0.69% 2 -0.32% 3 0.77% 4 0.57%
1992-4 0.67% 1 1.13% 20.88% 3 -1.37% 4 1.31%
1996-4 0.47% 1 0.42% 20.41% 3 0.21% 4 1.52%
Avg0.37% 0.92%0.59% -0.05% 1.83%
2000-4 6.56% 1 7.19% 2 -2.30% 3 -1.69% 4 9.76%
2004-4 1.07% 1 -0.92% 2 -0.47% 3 0.13% 4 -0.20%
2008-4-1.60% 1 4.19% 2 -2.57% 3 2.18% 4 2.20%
2012-4 0.91% 1 -0.20% 2 -1.46% 3 0.40% 4 -0.34%
2016-4 0.28% 1 0.27% 2 -1.10% 3 0.10% 4 -0.46%
Avg1.44% 2.10% -1.58% 0.22% 2.19%
OTC summary for PY4 1964 - 2016
Averages0.62% 1.05% -0.30% 0.23% 1.60%
%Winners64% 71% 36% 86% 71%
MDD4/20/20003.95% -- 3/19/20082.57% -- 4/4/2012 1.65%
OTC summary for all years 1963 - 2019
Averages0.16% 0.22%0.17% 0.46% 1.01%
% Winners53% 60% 61% 79% 61%
SPX PY4 (For reasons I did not investigate 1956 is missing.)
Day4 Day3 Day2 Day1 Totals
1960-4-0.39% 1 0.23% 20.00% 3 0.23% 4 0.07%
1964-4 0.01% 1 -0.18% 20.23% 3 0.28% 4 0.34%
1968-4-0.59% 5 1.78% 10.76% 3 0.90% 4 2.85%
1972-4-0.20% 1 -0.12% 2 -0.63% 3 0.67% 4 -0.29%
1976-4-0.15% 1 0.85% 2 -0.73% 3 0.36% 4 0.33%
Avg -0.26% 0.51% -0.08% 0.49% 0.66%
1980-4 1.40% 1 0.09% 20.49% 3 -0.52% 4 1.46%
1984-4 0.64% 1 0.41% 2 -0.67% 3 0.08% 4 0.46%
1988-4-0.17% 1 0.78% 2 -0.77% 3 0.32% 4 0.15%
1992-4 0.44% 1 1.55% 20.94% 3 -0.06% 4 2.88%
1996-4 1.27% 1 0.24% 20.09% 3 0.00% 4 1.60%
Avg0.72% 0.61%0.02% -0.04% 1.31%
2000-4 3.25% 1 2.87% 2 -0.98% 3 0.49% 4 5.63%
2004-4 0.77% 1 -0.21% 2 -0.66% 3 -0.11% 4 -0.21%
2008-4-0.90% 1 4.24% 2 -2.43% 3 2.64% 4 3.56%
2012-4 0.75% 1 -0.40% 2 -1.02% 3 -0.06% 4 -0.73%
2016-4 0.10% 1 -0.09% 2 -0.64% 3 -0.04% 4 -0.67%
Avg0.79% 1.28% -1.15% 0.58% 1.52%
SPX summary for PY4 1960 - 2016
Averages0.42% 0.80% -0.40% 0.35% 1.16%
%Winners60% 67% 33% 60% 73%
MDD3/19/20082.43% -- 4/5/20121.48% -- 4/19/2000 .98%
SPX summary for PY4 1953 - 2019
Averages0.09% 0.14%0.02% 0.34% 0.58%
% Winners51% 54% 50% 68% 66%
Conclusion
There are some things only government can do. Defense and courts are examples. We are experiencing governments with way too much power run amok.
Freedom of assembly is protected by the first amendment of the Constitution.
The strongest sectors last week were Precious metals and Telecomm; the weakest were Transportation and Banks. Maybe Energy has hit bottom.
I expect the major averages to be lower on Thursday April 9 than they were on Friday April 3.