Technical Market Report For February 23
Technical market report for February 22, 2020
The good news is:
The Negatives
Again, last week's new OTC highs were not confirmed by the breadth indicators (New highs and AD lines).
The small caps represented by the Russell 2000 (IWM) 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 again failed to confirm the index high by a large margin.
The Positives
All time index highs are a positive.
The secondaries have been stronger than the blue chips.
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 (NYA) data.
NY NH confirmed the new SPX high Wednesday.The implication is higher highs.
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 fell slightly to a strong 74%.
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 also fell slightly finishing the week at a strong 75%.
Seasonality
Next week includes the last 5 trading days 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 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.
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.
Precious metals and Utilities were the strongest sectors while energy and Tech were the weakest.
I expect the major averages to be higher on Friday February 28 than they were on Friday February 21.
Lasts week's positive forecast was a miss.
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