Technical Market Report For March 29
The good news is:
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Sitting at home indefinitely will give you an opportunity to rethink your portfolio strategy.
The Negatives
Analysts are forbidden to say “Things are different this time”. But, we have never had the government tell us to cease all business except food, drugs and gasoline.
Last Friday the WSJ declared we were in a new bull market because the major indices were up over 20% from their low 4 days earlier.
Not too long ago the government announced that some level of inflation was a good thing. Now even conservative economists are encouraging the government to expand the list of assets the Fed can buy. None of this is good for the dollar.
In these reports I try to point out what has happened in the past when a data set is behaving as it is in the present. Unfortunately things are different this time. The nearest vaguely similar example is 2008 – 2009.
The first chart covers the past 6 months showing the NASDAQ composite (COMP) 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 vertical lines have been drawn on the 1st trading day of each month, dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.
This chart looks pretty good.
The next chart is similar to the one above except it covers 9 months from June 2008 through March 2009.
The market can have short impressive rallies during a bear market, but you should be suspicious of every move as long as this indicator remains below the neutral line.
The next chart is similar to the first one except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated with NYSE data.
NY HL Ratio has a similar pattern, but a little weaker than OTC HL Ratio.
The next chart is similar to the one above except it covers 9 months from June 2008 through March 2009.
Risk is high as long as this indicator is below the neutral line.
The Positives
I am desperate here. I have declared that bottoms are easy to identify because new lows disappear. New lows peaked out on March 12 when there were 2377 on the NYSE (NYA) and 2097 on the NASDAQ (QQQ). Last Thursday (March 26) there were 21 new lows on the NYSE and 31 on the NASDAQ; a good disappearing act. Thirty years ago when I was researching new highs and new lows I found that when there were a lot of new lows (at that time more than 400 on the NYSE was a lot) there would be a retest of the previous low and sometimes more than 1 retest. The massive numbers of new lows reported March 12 suggest, at least, one retest of the March 23 index lows. There are very few examples so it is risky to generalize.
The next 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.
OTC NL is moving sharply upward.
The next chart is similar to the one above except it covers 9 months from June 2008 through March 2009
There were multiple retests over an 8 month period.
The next chart covers the past 6 months showing the SPX in red and NY NL, calculated with NYSE data, in blue.
Looks good.
The next chart is similar to the one above except is covers the period from June 2008 to March 2009. The pattern is similar to the NASDAQ chart with multiple retests before the final bottom.
Volume of ADVANCING issues on the OTC set another record 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% set another record Thursday.
The next chart is similar to the one above except it shows the SPX in red and NY UV 5% has been calculated with NYSE data.
This is still short of the record set coming off the bottom of March 2009.
Seasonality
Next week includes the last 2 trading days of March and the first 3 trading days of April 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 positive by all measures.
Given the current panic, seasonal averages are not relevant.
Report for the last 2 days of March and first 3 days of April.
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.
Break down by Presidential Years
OTC Presidential Year 4 (PY4)
Day2 Day1 Day1 Day2 Day3 Totals
1964-4 0.35% 1 -0.27% 2 -0.05% 3 0.72% 4 0.95% 5 1.70%
1968-4 1.18% 4 0.26% 5 2.39% 1 0.13% 2 0.98% 3 4.94%
1972-4 -0.15% 3 0.48% 4 -0.06% 1 0.56% 2 0.95% 3 1.78%
1976-4 -0.22% 2 0.14% 3 -0.20% 4 0.21% 5 0.88% 1 0.82%
1980-4 4.16% 5 1.35% 1 1.63% 2 2.00% 3 0.15% 4 9.30%
1984-4 0.25% 4 -0.34% 5 -0.39% 1 -0.37% 2 -0.15% 3 -1.00%
1988-4 -0.32% 3 0.77% 4 -0.73% 1 0.41% 2 1.16% 3 1.29%
1992-4 -0.43% 1 0.28% 2 -0.28% 3 -1.37% 4 -0.64% 5 -2.44%
1996-4 0.08% 4 0.60% 5 0.47% 1 0.42% 2 0.41% 3 2.00%
Avg 0.75% 0.53% 0.14% 0.22% 0.19% 1.83%
2000-4 -4.02% 4 2.58% 5 -7.63% 1 -1.77% 2 0.49% 3 -10.36%
2004-4 0.40% 2 -0.32% 3 1.04% 4 2.09% 5 1.07% 1 4.29%
2008-4 -0.86% 5 0.79% 1 3.67% 2 -0.06% 3 0.08% 4 3.62%
2012-4 -0.31% 4 -0.12% 5 0.91% 1 -0.20% 2 -1.46% 3 -1.18%
2016-4 0.47% 3 0.01% 4 0.92% 5 -0.46% 1 -0.98% 2 -0.04%
Avg -0.86% 0.59% -0.22% -0.08% -0.16% -0.73%
OTC summary for PY4 1964 - 2016
Averages 0.04% 0.44% 0.12% 0.17% 0.28% 1.05%
% Winners 50% 71% 50% 57% 71% 64%
MDD 4/4/2000 10.67% -- 4/3/1992 2.42% -- 4/4/2012 1.65%
OTC summary for all years 1963 - 2019
Averages -0.05% 0.18% -0.01% 0.20% 0.13% 0.44%
% Winners 60% 64% 53% 67% 68% 67%
MDD 4/4/2001 11.61% -- 4/4/2000 10.67% -- 4/2/1997 5.37%
SPX PY4
Day2 Day1 Day1 Day2 Day3 Totals
1928-4 1.74% 5 -0.78% 6 -1.15% 1 0.58% 2 -0.16% 3 0.24%
1932-4 2.11% 3 -5.56% 4 -1.78% 5 -1.11% 6 -0.56% 1 -6.90%
1936-4 -0.20% 1 0.74% 2 1.81% 3 0.99% 4 -0.46% 5 2.88%
1940-4 0.33% 5 0.57% 6 -0.33% 1 0.33% 2 1.55% 3 2.46%
1944-4 0.67% 4 -0.08% 5 0.17% 6 -0.66% 1 0.08% 2 0.17%
1948-4 1.16% 2 1.41% 3 0.27% 4 0.20% 5 0.00% 6 3.03%
1952-4 0.66% 6 0.12% 1 -0.78% 2 -0.25% 3 0.00% 4 -0.24%
1956-4 0.54% 3 -0.06% 4 0.45% 1 -0.35% 2 0.56% 3 1.14%
Avg 0.67% 0.39% -0.04% -0.15% 0.44% 1.31%
1960-4 -0.22% 3 -0.57% 4 0.16% 5 0.20% 1 0.59% 2 0.17%
1964-4 -0.06% 1 -0.20% 2 0.33% 3 0.58% 4 0.30% 5 0.95%
1968-4 -0.10% 4 0.70% 5 2.53% 1 0.17% 2 0.90% 3 4.20%
1972-4 -0.63% 3 0.67% 4 0.26% 1 0.60% 2 0.81% 3 1.70%
1976-4 -0.39% 2 0.75% 3 -0.52% 4 0.01% 5 1.23% 1 1.08%
Avg -0.28% 0.27% 0.55% 0.31% 0.77% 1.62%
1980-4 2.50% 5 1.40% 1 0.09% 2 0.49% 3 -0.52% 4 3.97%
1984-4 -0.23% 4 -0.21% 5 -0.75% 1 -0.20% 2 -0.08% 3 -1.47%
1988-4 -0.77% 3 0.32% 4 -1.08% 1 0.94% 2 2.70% 3 2.11%
1992-4 -0.12% 1 0.17% 2 0.13% 3 -0.92% 4 0.26% 5 -0.48%
1996-4 0.01% 4 -0.53% 5 1.27% 1 0.24% 2 0.09% 3 1.08%
Avg 0.28% 0.23% -0.07% 0.11% 0.49% 1.04%
2000-4 -1.37% 4 0.72% 5 0.49% 1 -0.75% 2 -0.49% 3 -1.39%
2004-4 0.40% 2 -0.07% 3 0.53% 4 0.85% 5 0.77% 1 2.48%
2008-4 -0.80% 5 0.57% 1 3.59% 2 -0.19% 3 0.13% 4 3.30%
2012-4 -0.16% 4 0.37% 5 0.75% 1 -0.40% 2 -1.02% 3 -0.46%
2016-4 0.44% 3 -0.20% 4 0.63% 5 -0.32% 1 -1.01% 2 -0.47%
Avg -0.30% 0.28% 1.20% -0.16% -0.33% 0.69%
SPX summary for PY4 1928 - 2016
Averages 0.24% 0.01% 0.31% 0.04% 0.25% 0.85%
% Winners 48% 57% 70% 57% 57% 70%
MDD 4/4/1932 8.79% -- 4/2/1928 1.92% -- 4/4/1988 1.53%
SPX summary for all years 1928 - 2019
Averages -0.01% -0.11% 0.15% 0.20% 0.09% 0.32%
% Winners 47% 44% 62% 60% 55% 64%
MDD 4/4/1932 8.79% -- 3/31/1939 7.89% -- 4/6/1953 5.31%
Conclusion
These are the legendary days of helicopter money. With the economy shut down what are you going to spend it on?
The strongest sectors last week were Telecom and Electronics; the weakest were Banks and Energy.
I expect the major averages to be lower on Friday April 3 than they were on Friday March 27.
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