Technical Stock Market Report

March 21, 2015

The good news is:  The small caps and mid-caps finished the week at all-time highs and the blue chips were not far behind.

The negatives: Negatives are hard to find.  New highs have been coming up short for a while, but that changed last week.  Seasonality is positive until it takes a little break in mid-May.

The positives:  Everything is in the plus column.  New highs have been expanding, new lows shrinking and the secondaries are leading the way up.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 40% trend 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 neutral 50% level for the indicator.

OTC HL Ratio recovered continued to rise sharply last week.

The next chart is similar to the one above except is shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated with NYSE data.

NY HL Ratio also moved sharply upward last week.

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green

NY NH has been falling for the past 6 weeks but began a recovery last week.

The next chart is similar to the one above except it shows the OTC in blue and OTC NH in green has been calculated from NASDAQ data.

The OTC and OTC NH both finished the week at their highest levels for the period.

Seasonality

Next week includes the first 5 trading days prior to the 4th Friday of March during the 3rd year of the Presidential Cycle.

The tables below show the daily change, on a percentage basis for the 5 trading days prior to the 4th Friday of March during the 3rd year of the Presidential Cycle.

OTC data covers the period from 1963 to 2014 while SPX data runs from 1953 through 2014.  There are summaries for both the 3rd year of the Presidential Cycle and all years combined.  Prior to 1953 the market traded 6 days a week so that data has been ignored.

Average returns for the coming week have stronger during the 3rd year of the Presidential Cycle than other years. 

Conclusion

Everything that matters turned upward last week.  This rally should be good for 2 months.

I expect the major averages to be higher on Friday March 27 than they were on Friday March 20.

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Disclaimer: Charts and figures presented herein are believed to be reliable but I cannot attest to their accuracy.  Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus and the Wall Street Journal (wsj.com).  Historical data is from Barron's and ISI price books.  The views expressed dare provided for information purposes only and should not be construed in any way as investment advice.  Furthermore, the opinions expressed may change without notice.

Mike Burk began developing equity trading systems in the early 1980's.  Through the 1990's he marketed an equity trading system called MIRAT based on breadth indicators, but, primarily new lows.  In the early days of this century he developed the seasonal trading strategies currently used by Alpha Investment Management of Cincinnati.  Mr. Burk has been writing equity market newsletters since the early 1990's.  During the past 10 years the letter observes both breadth and seasonal strategies.
 
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