Technical Market Report - Monday, December 2

By Mike Burk of Stockmarket-ta.com

Monday, December 2, 2019 9:12 AM EST

The good news is: All of the major averages closed at all-time highs last Wednesday.

The Negatives

The holiday week at the end of the month did what it was supposed to do seasonally. The only problem was that new highs on the NYSE came up a little short.

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH failed to confirm the new SPX high by a large margin.

The Positives

All-time record highs are positive.

The Russell 2000 (R2K) joined the rest of the major indices surpassing its previous high set last May. This confirmation implies higher highs ahead.

The next chart is similar to the first one except it shows the Nasdaq composite (OTC) in blue and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH confirmed the OTC high also implying higher highs ahead.

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 jumped up to a comfortable 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 Ratio rose to a strong 81%.

Seasonality

Next week includes the first 5 trading days of December during the 3rd 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 3rd year of the Presidential Cycle and all years combined.

Average returns for the first 5 trading days of December have been positive by all measures.

Report for the first 5 days of December.
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.

OTC Presidential Year 3 (PY3)
Day1 Day2 Day3 Day4 Day5 Totals
1963-3 0.70% 1 0.64% 2 0.81% 3 0.43% 4 0.28% 5 2.85%
1967-3 0.74% 5 0.87% 1 0.99% 2 0.47% 3 0.37% 4 3.44%
1971-3 1.81% 3 0.28% 4 1.05% 5 -0.32% 1 0.32% 2 3.14%
1975-3 -0.18% 1 -1.27% 2 -2.56% 3 -0.62% 4 -0.64% 5 -5.27%

1979-3 -0.28% 1 0.65% 2 0.77% 3 0.77% 4 0.31% 5 2.22%
1983-3 0.14% 4 -0.76% 5 -0.50% 1 -0.16% 2 0.04% 3 -1.24%
1987-3 0.03% 2 -0.01% 3 -2.12% 4 -1.95% 5 0.63% 1 -3.42%
1991-3 1.34% 1 0.46% 2 0.36% 3 -0.23% 4 0.43% 5 2.35%
1995-3 -0.37% 5 1.37% 1 -0.36% 2 -0.39% 3 -0.80% 4 -0.55%

Avg 0.17% 0.34% -0.37% -0.39% 0.12% -0.13%

1999-3 0.52% 3 2.95% 4 1.96% 5 0.72% 1 1.15% 2 7.32%
2003-3 1.51% 1 -0.49% 2 -1.00% 3 0.44% 4 -1.57% 5 -1.12%
2007-3 -0.90% 1 -0.66% 2 1.78% 3 1.60% 4 -0.11% 5 1.72%
2011-3 0.22% 4 0.03% 5 1.10% 1 -0.23% 2 -0.01% 3 1.10%
2015-3 0.93% 2 -0.64% 3 -1.67% 4 2.08% 5 -0.79% 1 -0.09%

Avg 0.46% 0.24% 0.43% 0.92% -0.27% 1.79%

OTC summary for PY3 1963 - 2015
Averages 0.44% 0.25% 0.04% 0.19% -0.03% 0.89%
% Winners 71% 57% 57% 50% 57% 57%
MDD 12/5/1975 5.18% -- 12/4/1987 4.04% -- 12/5/2003 2.61%

OTC summary for all years 1963 - 2018
Averages 0.16% 0.09% 0.41% -0.03% 0.04% 0.67%
% Winners 61% 61% 68% 55% 50% 57%
MDD 12/1/2008 8.95% -- 12/6/1974 7.53% -- 12/7/2018 6.35%

SPX PY3
Day1 Day2 Day3 Day4 Day5 Totals
1931-3 -1.26% 2 -3.52% 3 1.88% 4 -2.17% 5 3.44% 6 -1.64%
1935-3 -1.54% 1 2.75% 2 0.84% 3 -0.23% 4 -0.23% 5 1.59%

1939-3 0.74% 5 0.08% 6 -0.16% 1 -0.16% 2 1.55% 3 2.04%
1943-3 1.00% 3 0.81% 4 0.09% 5 0.09% 6 0.36% 1 2.34%
1947-3 0.53% 1 0.13% 2 -0.93% 3 -0.60% 4 -1.55% 5 -2.41%
1951-3 0.26% 6 0.31% 1 0.56% 2 -0.30% 3 1.17% 4 2.00%
1955-3 -0.35% 4 0.20% 5 0.57% 1 0.00% 2 -0.33% 3 0.09%

Avg 0.44% 0.31% 0.03% -0.20% 0.24% 0.81%

1959-3 0.72% 2 -0.17% 3 0.22% 4 0.20% 5 0.19% 1 1.16%
1963-3 0.59% 1 -0.05% 2 0.24% 3 0.65% 4 -0.38% 5 1.05%
1967-3 0.53% 5 0.63% 1 0.14% 2 0.43% 3 -0.12% 4 1.62%
1971-3 1.65% 3 0.31% 4 1.27% 5 -0.57% 1 0.37% 2 3.04%
1975-3 -0.62% 1 -1.48% 2 -1.94% 3 0.27% 4 -1.16% 5 -4.93%

Avg 0.57% -0.15% -0.01% 0.20% -0.22% 0.39%

1979-3 -0.31% 1 0.91% 2 0.43% 3 0.70% 4 -0.44% 5 1.28%
1983-3 0.05% 4 -0.63% 5 0.20% 1 -0.18% 2 0.27% 3 -0.29%
1987-3 0.74% 2 0.62% 3 -3.53% 4 -0.57% 5 2.16% 1 -0.58%
1991-3 1.65% 1 -0.12% 2 -0.23% 3 -0.71% 4 0.45% 5 1.05%
1995-3 0.27% 5 1.10% 1 0.65% 2 0.40% 3 -0.65% 4 1.78%

Avg 0.48% 0.38% -0.50% -0.07% 0.36% 0.65%

1999-3 0.62% 3 0.82% 4 1.72% 5 -0.69% 1 -1.00% 2 1.46%
2003-3 1.13% 1 -0.33% 2 -0.18% 3 0.47% 4 -0.77% 5 0.32%
2007-3 -0.59% 1 -0.65% 2 1.52% 3 1.50% 4 -0.18% 5 1.60%
2011-3 -0.19% 4 -0.02% 5 1.03% 1 0.11% 2 0.20% 3 1.13%
2015-3 1.07% 2 -1.10% 3 -1.44% 4 2.05% 5 -0.70% 1 -0.12%

Avg 0.41% -0.26% 0.53% 0.69% -0.49% 0.88%

SPX summary for PY3 1931 - 2015
Averages 0.30% 0.03% 0.13% 0.03% 0.12% 0.62%
% Winners 68% 55% 68% 50% 45% 73%
MDD 12/4/1931 5.05% -- 12/5/1975 4.84% -- 12/4/1987 4.08%

SPX summary for all years 1928 - 2018
Averages -0.01% 0.09% 0.23% 0.06% 0.12% 0.49%
% Winners 49% 55% 62% 52% 50% 66%
MDD 12/1/2008 8.93% -- 12/6/1974 7.09% -- 12/6/1928 5.64%

December
Since 1963, over all years, the OTC in December has been up 61% of the time with an average gain of 1.6%. During the 3rd year of the Presidential Cycle December has been up 57% time with an average gain of 4.1%. The best December for the OTC was 1999 (+22.0%), the worst, 2002 (-9.7%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in December over all years since 1963 while the black line shows the average during the 3rd year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 73% of the time in December with an average gain of 1.3%. During the 3rd year of the Presidential Cycle, the SPX has been up 73% of the time with an average gain of 2.2%. The best December for the SPX was 1991 (+11.2%) the worst, 1931 (-14.5%).

The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in December in red and the performance during the 3rd year of the Presidential Cycle in black.

Since 1979 the Russell 2000 (R2K) has been up 75% of the time in December with an average gain of 2.1%. During the 3rd year of the Presidential Cycle, the R2K has been up 70% of the time with an average gain of 3.1%. The best December for the R2K, 1999 (+11.2%), the worst, 2018 (-12.0%)

The chart below is similar to those above except it shows the daily performance overall years of the R2K in December in magenta and the performance during the 3rd year of the Presidential Cycle in black.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 69% of the time in December with an average gain of 1.2%. During the 3rd year of the Presidential Cycle, the DJIA has been up 78% of the time in December with an average gain of 1.5%. The best December for the DJIA, 1903 (+10.8%), the worst, 1931 (-17.0%).

The chart below is similar to those above except it shows the daily performance overall years of the DJIA in December in grey and the performance during the 3rd year of the Presidential Cycle in black.