Technical Stock Market Report

The good news is:  Last week, for the 1st time in 15 years, the NASDAQ composite (OTC) closed at an all-time high.  The S&P500 (SPX) also finished the week at an all-time high.

The negatives:  New highs continue to come up short.

The chart below 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.  Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH has been falling since its high in late January.  In technical jargon this is a non confirmation.

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

OTC NH was well off its recent high failing to confirm the all time high in the index on Friday.

The positives:  Nothing really bad happens without an increase in the number of new lows and that has not happened.

The chart below 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 neutral 50% level for the indicator.

OTC HL Ratio finished the week at a comfortable 76%, but lower than its levels during other highs reached during the past 2 months..

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

NY HL Ratio finished the week at a strong 88%, but also at a lower level during recent index highs.

Money supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth fell last week.

May

Since 1963, over all years the OTC in May has been up 60% of the time with an average gain of 0.6%.  During the 3rd year of the Presidential Cycle May has been up 62% time with an average gain of 1.9%.  The worst May ever, 1970 (-13.0%), the best 1997 (+11.1%)

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 May over all years since 1963 while the black line shows the average during the 3rd year of the Presidential Cycle.

Since 1928 the SPX has been up 56% of the time in May with an average loss of -0.2% (helped by a loss of -23.3% in 1932 and -24.0% in 1940).  During the 3rd year of the Presidential Cycle the SPX has been up 52% of the time with an average gain of 0.1%.  The best ever May for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

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

Since 1979 the Russell 2000 (R2K) has been up 64% of the time in May with an average gain of 1.3%.  During the 3rd year of the Presidential Cycle the R2K has been up 67% of the time with an average gain of 2.7%.  The best ever May for the R2K, 2003 (+10.6%), the worst 2010 (-7.7%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in May 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 51% of the time in May with an average loss of -0.1%.  During the 3rd year of the Presidential Cycle the DJIA has been up 50% of the time with an average loss of -0.5%.  The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in May in Magenta and the performance during the 3rd year of the Presidential Cycle in black.

Conclusion

The market is a little overbought.  The OTC was up every day last week.  The breadth indicators are good, but not great and Seasonality is positive, but not great.  I think the market is likely to take a rest for a few days.

I expect the major averages to be lower on Friday May 1 than they were on Friday April 24.

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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.