Technical Market Report May 01/05
by Mike Burk
May 01/05
The good news is:
• Seasonally next week is one of the strongest weeks of the year.
New lows resumed their build up last week taking the small cap indices
to new lows for the year. The large cap indices did not make new yearly
lows last week and ended the week with modest gains. The superior performance
of the large cap indices is a negative.
I have been showing the chart below for the past several weeks. It shows
the NASDAQ composite (OTC) in red and a 10% trend (19 day EMA) of NASDAQ
new lows in blue. The new low indicator (NL) has been plotted on an inverted
Y axis so when new lows are decreasing the indicator moves upward and
when new lows are increasing the indicator moves downward. The chart begins
July 30, 2004 and dashed vertical lines indicate the 1st trading day of
each month. When a bottom has been reached new lows diminish rapidly causing
the indicator to move sharply upward like it did last August. Very short
term the indicator can give false signals so it is prudent to wait for
5 consecutive trading days of upward movement before assuming a bottom
is in. For the past week the indicator moved sharply downward.
A similar chart using NYSE data shows NL well below its level of last
August. The S&P 500 (SPX) is shown in red and NL calculated from NYSE
data is shown in brown.
Defining next week as the first 5 trading days of May, the tables below
show the daily performance of the OTC and SPX during the first year of
the presidential cycle.
The first 5 trading days in May during the 1st year of the presidential cycle have been up about 90% of the time since 1928. Long term, the strongest 5 day period I can recall.
First 5 days of May.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.
MDD = Maximum Draw Down
Avg = Mean of the previous 5 periods.
Averages = Mean for all periods.
OTC Presidential year 1 |
||||||
|
Day1 |
Day2 |
Day3 |
Day4 |
Day5 |
Totals |
1965-1 |
0.27% 1 |
-0.04% 2 |
0.31% 3 |
0.04% 4 |
0.13% 5 |
0.72% |
1969-1 |
0.26% 4 |
0.12% 5 |
0.34% 1 |
0.19% 2 |
-0.38% 3 |
0.53% |
1973-1 |
0.10% 2 |
1.01% 3 |
0.70% 4 |
0.98% 5 |
-0.37% 1 |
2.42% |
1977-1 |
0.37% 1 |
0.40% 2 |
0.44% 3 |
0.27% 4 |
0.01% 5 |
1.48% |
1981-1 |
-0.03% 5 |
-1.55% 1 |
-0.83% 2 |
0.20% 3 |
0.79% 4 |
-1.41% |
Avg |
0.19% |
-0.01% |
0.19% |
0.34% |
0.04% |
0.75% |
|
||||||
1985-1 |
-0.33% 3 |
-0.22% 4 |
0.47% 5 |
-0.16% 1 |
0.37% 2 |
0.12% |
1989-1 |
-0.02% 1 |
0.13% 2 |
0.19% 3 |
0.09% 4 |
0.35% 5 |
0.74% |
1993-1 |
0.80% 1 |
1.72% 2 |
0.75% 3 |
-0.47% 4 |
0.21% 5 |
3.00% |
1997-1 |
0.77% 4 |
2.74% 5 |
2.60% 1 |
-0.81% 2 |
-0.41% 3 |
4.89% |
2001-1 |
2.46% 2 |
2.42% 3 |
-3.35% 4 |
2.11% 5 |
-0.82% 1 |
2.82% |
Avg |
0.74% |
1.36% |
0.13% |
0.15% |
-0.06% |
2.31% |
|
||||||
Averages |
0.47% |
0.67% |
0.16% |
0.24% |
-0.01% |
1.53% |
% Winners |
70% |
70% |
80% |
70% |
60% |
90% |
MDD 5/3/2001 3.35% -- 5/5/1981 2.39% -- 5/7/1997 1.22% |
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|
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OTC summary for all years 1963 - 2004 |
||||||
Averages |
0.29% |
0.18% |
0.10% |
0.03% |
0.01% |
0.60% |
% Winners |
61% |
71% |
66% |
57% |
55% |
62% |
MDD 5/7/2002 6.78% -- 5/3/2000 6.34% -- 5/6/1966 3.58% |
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|
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SPX presidential year 1 |
||||||
|
Day1 |
Day2 |
Day3 |
Day4 |
Day5 |
Totals |
1929-1 |
0.19% 3 |
0.46% 4 |
1.00% 5 |
0.42% 6 |
-0.60% 1 |
1.46% |
1933-1 |
1.32% 1 |
0.36% 2 |
-0.59% 3 |
2.85% 4 |
1.04% 5 |
4.98% |
1937-1 |
0.00% 6 |
0.24% 1 |
1.58% 2 |
-0.84% 3 |
0.72% 4 |
1.71% |
1941-1 |
-0.11% 4 |
0.32% 5 |
0.21% 6 |
-0.11% 1 |
1.71% 2 |
2.04% |
|
||||||
1945-1 |
-0.34% 2 |
-0.14% 3 |
0.68% 4 |
0.34% 5 |
0.20% 6 |
0.74% |
1949-1 |
0.27% 1 |
0.47% 2 |
1.14% 3 |
-0.07% 4 |
-0.60% 5 |
1.22% |
1953-1 |
0.45% 5 |
1.09% 1 |
0.12% 2 |
-0.12% 3 |
-0.40% 4 |
1.14% |
1957-1 |
0.61% 3 |
0.80% 4 |
-0.11% 5 |
-0.15% 1 |
-0.30% 2 |
0.85% |
1961-1 |
-0.21% 1 |
0.72% 2 |
0.82% 3 |
0.39% 4 |
0.12% 5 |
1.84% |
Avg |
0.16% |
0.59% |
0.53% |
0.08% |
-0.20% |
1.16% |
|
||||||
1965-1 |
0.13% 1 |
0.31% 2 |
0.22% 3 |
0.23% 4 |
-0.08% 5 |
0.83% |
1969-1 |
-0.17% 4 |
0.47% 5 |
0.36% 1 |
0.47% 2 |
-0.18% 3 |
0.94% |
1973-1 |
0.12% 2 |
1.24% 3 |
1.65% 4 |
0.71% 5 |
-0.42% 1 |
3.30% |
1977-1 |
0.50% 1 |
0.51% 2 |
0.53% 3 |
0.15% 4 |
-0.62% 5 |
1.07% |
1981-1 |
-0.07% 5 |
-1.54% 1 |
-0.27% 2 |
0.35% 3 |
0.68% 4 |
-0.85% |
Avg |
0.10% |
0.20% |
0.50% |
0.38% |
-0.12% |
1.06% |
|
||||||
1985-1 |
-0.81% 3 |
0.36% 4 |
0.60% 5 |
-0.05% 1 |
0.43% 2 |
0.52% |
1989-1 |
-0.17% 1 |
-0.32% 2 |
0.01% 3 |
-0.13% 4 |
-0.05% 5 |
-0.66% |
1993-1 |
0.52% 1 |
0.36% 2 |
0.11% 3 |
-0.28% 4 |
-0.21% 5 |
0.48% |
1997-1 |
-0.35% 4 |
1.81% 5 |
2.13% 1 |
-0.31% 2 |
-1.47% 3 |
1.82% |
2001-1 |
1.36% 2 |
0.08% 3 |
-1.49% 4 |
1.44% 5 |
-0.24% 1 |
1.15% |
Avg |
0.11% |
0.46% |
0.27% |
0.14% |
-0.31% |
0.66% |
|
||||||
Averages |
0.17% |
0.40% |
0.46% |
0.28% |
-0.01% |
1.29% |
% Winners |
53% |
84% |
79% |
53% |
37% |
89% |
MDD 5/5/1981 1.87% -- 5/7/1997 1.77% -- 5/3/2001 1.49% |
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|
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SPX summary for all years 1928 - 2004 |
||||||
Averages |
0.07% |
0.16% |
0.25% |
-0.01% |
0.11% |
0.57% |
% Winners |
53% |
71% |
68% |
44% |
47% |
66% |
MDD 5/3/1930 8.27% -- 5/4/2000 4.01% -- 5/5/1970 3.58% |
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Typically, measured by the OTC, May is the 4th strongest month in the 1st year of the presidential cycle. Returns in May follow January, October and April.
So far this year has not been typical. As measured by the OTC, the first 4 months of this year have been down. That has happened twice before since 1963. In 1973, also the 1st year of the presidential cycle the OTC was down in each of the 1st 6 months of the year and finished the year down 31.1%. The other occurrence was in 1984 (the 4th year of the presidential cycle) when every month through May was down and the OTC finished down 11.2% for the year.
The chart below shows the average performance for the OTC in May during
the 1st year of the presidential cycle in white and all years in yellow.
Data covers 1963 - 2004.
Typically, measured by the SPX, May is also the 4th strongest month of
the 1st year of the presidential cycle. The order of returns for the SPX
are a little different, May follows April, January and July. In February
of this year the SPX rose 1.2% so it does not have the impressive negative
record of the OTC.
The chart below shows the average performance of the SPX in May during
the 1st year of the presidential cycle in white and all years in maroon.
Data covers 1928 - 2004.
Prices were mixed last week, the blue chips up and the secondaries down,
add increasing new lows and the picture is bleak. Seasonally, however,
next week has been one of the strongest in the 1st year of the presidential
cycle.
I expect the major indices to be higher on Friday May 6 than they were on Friday April 29.
The major indices were mixed last week so I am calling last weeks positive forecast a tie.
Mike Burk
Guaranteed-Profits.com
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