Technical Stock Market Report

The good news is: The NASDAQ composite (OTC) closed at a multi year high on Friday while most of the other broad based indices closed at all time highs.

The negatives: Negatives are hard to find. New highs, which have been lagging for months, picked up nicely last week.

Volume also picked up.

The positives: New highs picked up, new lows remained dormant, volume picked up and most of the indices closed at new highs.  This is about as good as it gets.

The chart below covers the past 6 months showing the NASDAQ composite (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 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.

OTC HL Ratio finished the week above 90% again.

There are trading systems that impose a NO SELL filter when variations of this indicator are above 80%.

The next chart is similar to the one above except it shows the S&P500 (SPX) in red and NY HL Ratio, in blue, has been calculated from NYSE data.

NY HL Ratio is also above 90%.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

Money supply growth is a little above its long term trend.

November

Since 1963, over all years, the OTC in November has been up 68% of the time with an average gain of 1.5%.  During the 1st year of the Presidential Cycle November has been up 83% time with an average gain of 2.1% The best November ever for the OTC was 2001 (+14.2%), the worst 2000 (-22.9%).

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 November over all years since 1963 while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 58% of the time in November with an average gain of 0.6%.  During the 1st year of the Presidential Cycle the SPX has been up 67% of the time with an average gain of 0.5%.  The best November ever for the SPX was 1928 +12.0% the worst 1929 -13.4%.

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in November in red and the performance during the 1st year of the Presidential Cycle in green.

Since 1979 the Russell 2000 (R2K) has been up 65% of the time in November with an average gain of 1.8%.  During the 1st year of the Presidential Cycle the R2K has been up 75% of the time in November with an average gain of 2.7%.  The best November ever for the R2K, 2002 +8.8%, the worst 2008 -12.0%.

The chart below is similar to those above except it shows the daily performance over all years of the R2K in November in magenta and the performance during the 1st year of the Presidential Cycle in green.

Since 1885 the DJIA has been up 58% of the time in November with an average gain of 0.8%.  During the 1st year of the Presidential Cycle the DJIA has been up 63% of the time in November with an average gain of 0.5%.  The best November ever for the DJIA, 1928 +16.3%, the worst 1973 -14.0%.

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in November in cyan and the performance during the 1st year of the Presidential Cycle in green.

Conclusion:

The market has everything going for it right now.

It can only get worse, but, there is no evidence of that now.

I expect the major averages to be higher on Friday November 1 than they were on Friday October 25.

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Disclaimer: Mike Burk is an employee and principal of Alpha Investment Management (Alpha) a registered investment advisor. Charts and figures presented herein are believed to be reliable but we cannot attest to their accuracy.   Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus (qp2.com) 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.