Technical Market Report May 21/05
by Mike Burk
May 21/05
The good news is:
• With the exceptions of energy, gold, drugs and utilities, all of the
indicators in all of the sectors as well as the broad market are moving
sharply upward.
Last week the market took off removing any doubt that the late April lows represent a significant bottom.
Summation indices (SI) are running totals of oscillator values. When
the oscillator is positive the SI rises when the oscillator is negative,
the SI falls. The chart below shows the NASDAQ composite (OTC) and NASDAQ
SI's calculated from advancing issues - declining issues, new highs -
new lows and upside volume - downside volume. The SI's offer a good indicator
of the trend and all of the NASDAQ SI's are heading sharply upward. The
NYSE chart as well as most of the sector charts look the same.
The new low indicator (NL) is a 10% trend (19 day EMA) of new lows plotted
on an inverted Y axis. NL moves downward when new lows are increasing
and upward when new lows are decreasing. After a bottom new lows diminish
quickly moving the indicator sharply upward. The chart below covers the
period from early August last year through last Friday so you can see
how the indicator behaved after both the low of last August and the recent
low. Currently the indicator is moving sharply upward indicating the April
low was significant.
The secondaries lead both up and down.
The chart below shows the Russell 2000 (R2K) in red, the S&P 500
(SPX) in green and a FastTrack relative strength indicator called Accutrack
as a histogram in yellow. Although not yet positive, Accutrack has been
rising sharply since the late April lows indicating the R2K has been outperforming
the SPX since the April lows.
Seasonally the days prior to holidays are often strong. Defining next
week as the week before Memorial Day in the 1st year of the presidential
cycle, the upcoming week looks pretty good.
Memorial Day was first observed May 30, 1868 and continued to be observed on May 30 until the National Holiday Act of 1971 moved the official observance to the last Monday of May to provide a consistent 3 day weekend.
The tables below show the performance of the OTC and SPX during week before Memorial Day in the 1st year of the presidential cycle since 1971, with summary data for all years since 1971.
5 days before Memorial Day
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 1 |
||||||
|
Day5 |
Day4 |
Day3 |
Day2 |
Day1 |
Totals |
1973-1 |
-2.07% 1 |
0.82% 2 |
0.49% 3 |
2.14% 4 |
0.86% 5 |
2.24% |
1977-1 |
-0.87% 1 |
-0.50% 2 |
-0.50% 3 |
-0.01% 4 |
-0.28% 5 |
-2.16% |
1981-1 |
0.20% 1 |
-0.38% 2 |
0.70% 3 |
0.33% 4 |
0.40% 5 |
1.25% |
|
||||||
1985-1 |
0.95% 1 |
-0.18% 2 |
-0.31% 3 |
-0.30% 4 |
0.00% 5 |
0.16% |
1989-1 |
-0.06% 1 |
-0.37% 2 |
0.30% 3 |
0.32% 4 |
0.52% 5 |
0.72% |
1993-1 |
0.06% 1 |
0.05% 2 |
1.30% 3 |
0.07% 4 |
-0.58% 5 |
0.90% |
1997-1 |
0.04% 1 |
1.69% 2 |
0.73% 3 |
-0.09% 4 |
1.25% 5 |
3.61% |
2001-1 |
4.85% 1 |
0.36% 2 |
-3.04% 3 |
1.72% 4 |
-1.36% 5 |
2.53% |
Avg |
1.17% |
0.31% |
-0.20% |
0.34% |
-0.03% |
1.58% |
|
||||||
Averages |
0.39% |
0.19% |
-0.04% |
0.52% |
0.10% |
1.16% |
%Winners |
63% |
50% |
63% |
63% |
50% |
88% |
MDD 5/23/2001 3.04% -- 5/27/1977 2.14% -- 5/21/1973 2.07% |
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|
||||||
Summary for OTC all years 1971 - 2004 |
||||||
Averages |
-0.28% |
-0.07% |
0.12% |
0.20% |
0.14% |
0.13% |
% Winners |
42% |
47% |
62% |
59% |
62% |
62% |
|
||||||
|
||||||
SPX Presidential Year 1 |
||||||
|
Day5 |
Day4 |
Day3 |
Day2 |
Day1 |
Totals |
1973-1 |
-1.09% 1 |
0.83% 2 |
0.47% 3 |
2.95% 4 |
0.75% 5 |
3.91% |
1977-1 |
-1.31% 1 |
-0.49% 2 |
-0.92% 3 |
0.25% 4 |
-0.76% 5 |
-3.23% |
1981-1 |
0.28% 1 |
-0.34% 2 |
-0.07% 3 |
-0.19% 4 |
-0.32% 5 |
-0.64% |
|
||||||
1985-1 |
1.23% 1 |
-0.04% 2 |
-0.57% 3 |
-0.51% 4 |
0.37% 5 |
0.47% |
1989-1 |
0.23% 1 |
-1.14% 2 |
0.26% 3 |
0.01% 4 |
0.76% 5 |
0.12% |
1993-1 |
0.48% 1 |
0.19% 2 |
1.02% 3 |
-0.23% 4 |
-0.49% 5 |
0.98% |
1997-1 |
0.42% 1 |
1.01% 2 |
-0.27% 3 |
-0.44% 4 |
1.36% 5 |
2.08% |
2001-1 |
1.62% 1 |
-0.26% 2 |
-1.55% 3 |
0.32% 4 |
-1.18% 5 |
-1.06% |
Avg |
0.80% |
-0.05% |
-0.22% |
-0.17% |
0.16% |
0.52% |
|
||||||
Averages |
0.23% |
-0.03% |
-0.20% |
0.27% |
0.06% |
0.33% |
%Winners |
75% |
38% |
38% |
50% |
50% |
63% |
MDD 5/27/1977 3.20% -- 5/25/2001 2.66% -- 5/27/1957 1.16% |
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|
||||||
Summrary for SPX all years 1971 - 2004 |
||||||
Averages |
-0.10% |
-0.04% |
0.01% |
0.07% |
0.15% |
0.08% |
% Winners |
53% |
50% |
56% |
50% |
59% |
59% |
The times when I am most confident are also the times that I am usually wrong.
That said, next week appears to have everything going for it.
I expect the major indices to be higher on Friday May 27 than they were on Friday May 20.
Mike Burk
Guaranteed-Profits.com
The SEC does not like statements like "Guaranteed Profits" and would be delighted to prosecute if I did anything that came under their jurisdiction such as offering individualized advice. So don't ask.
Technical analysis is the study of trading patterns. Technical analysists think that at least some trading patterns repeat with some regularity. If that is true, it should be possible to make a forecast of future market behavior.
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