Technical Market Report For Saturday, Jan. 30

The good news is that the NASDAQ composite (OTC) and S&P 500 (SPX) closed at confirmed all-time highs last Monday, Jan. 25.

The Negatives

Most analysts recoil at the statement “Things are different this time.” This is sometimes true, and the following 2 charts illustrate an example of such. Both charts cover the past 15 years, with dashed vertical lines drawn on the first trading day of each year.

The first chart shows the OTC in blue and a 5% trend (39-day EMA) of NASDAQ volume of advancing issues (OTC UV) in green. You can see how upside volume exploded in 2020.

The next chart is similar to the first one, except it shows a 5% trend of volume of declining issues in (OTC DV) in orange. OTC DV has been plotted on an inverted Y axis, so decreasing OTC DV shifts the indicator upward (and up is good).

As you can see, since the COVID-19 crash in March, OTC DV has remained at a higher level than it was at its peak in 2008. It is different this time.

This is the result of free money.

The Positives

New highs confirmed the OTC all-time high last Monday.

The next chart covers the past six 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 first trading day of each month. The OTC NH confirmed the OTC high, which implies higher prices ahead.

The next chart is similar to the first one, except it shows the SPX in red and the NY NH in green. The information has been calculated with NYSE data. The NY NH failed to confirm Monday’s SPX all-time high, but not by much.

The next chart covers the past six months, showing the SPX in red and a 40% trend (four-day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio) in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level.

New highs fell significantly last week, but there has been no buildup of new lows.

The next chart is similar to the one above, except it shows the OTC in blue and the OTC HL Ratio in red. The information has been calculated with NASDAQ data. New highs also collapsed on the OTC, while new lows picked up a little. However, the number of new lows did not exceed new highs on either market last week.

Seasonality

Next week includes the first five trading days of February during the first year of the Presidential Cycle. The tables below show the daily change on a percentage basis for that period. 

The OTC data covers the period from 1963 to 2020, while the SPX data runs from 1928 to 2020. There are summaries for both the first year of the Presidential Cycle and all years combined. Average returns for the coming week have been modestly positive.

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