Technical Market Report December 11/04
by Mike Burk
December 11/04
The good news is:
New lows remained minimal during the past week suggesting the recent
weakness is not the beginning of a turning point, but a normal correction
in a strong market.
The chart below is an update of the one I used the past three weeks showing the NASDAQ composite in red and an indicator constructed by subtracting momentum of NASDAQ new lows from momentum of new highs in purple. Vertical dashed lines are drawn at the first trading day of each month and the period representing September has been labeled.
The indicator is short term and nearly binary in its representation of market strength moving sharply upward or downward at turning points.
After a 4-5 week run up from mid August the indicator fell in mid September
for about a week as the market corrected. The fall was arrested as the
market entered the seasonally strong end of month period. A similar pattern
developed in mid November after a 4 week run up, again the indicators
weakness was arrested as the market entered the seasonally strong Thanksgiving
and end of month period.
The pattern is continuing to follow the October example suggesting there
are a few days left on the downside
The chart below is another update from last week. It shows the NASDAQ
composite and the NASDAQ new high indicator (a 10% trend of NASDAQ new
highs). The indicator does a nice job of smoothing out the wiggles in
prices and is declining sharply suggesting the modest strength in prices
of the past three days will give way to further declines next week.
Summation indices (SI) are a running total of oscillator values. When
the oscillator is above 0 the SI rises when it is below 0 the SI falls.
The chart below shows the NASDAQ composite and SI’s derived from
NASDAQ advancing – declining issues, new highs – new lows
and upside – downside volume. The SI’s lag a little, but when
they are all heading the same direction, it is imprudent to bet against
them and they are all heading downward.
Typically, December starts and finishes strong with weakness in the middle.
Next week, defined as the week before options expiration, has been better
for the blue chips than the small caps. It usually begins weak and ends
strong.
In the table of presidential years, 2000 was weak enough to distort the
averages.
Report for the week prior to witching Friday during Dec.
Witching is futures and options expiration the 3rd Friday of the month.
The witching Friday is marked *Fri*.
The number following the year is the position in the presidential cycle.
R2K
Year
Mon Tue
Wed Thur
*Fri* Totals
1988-4 -0.21%
-0.20% 0.01%
-0.01% 0.82%
0.41%
1989-1 -0.44%
0.01% 0.18%
-0.65% -0.44%
-1.34%
1990-2 -0.81%
0.65% 0.47%
0.12% 0.09%
0.53%
1991-3 0.59%
-0.50% -0.16%
-0.66% -0.07%
-0.81%
1992-4 -0.15%
-0.57% -0.46%
0.70% 0.63%
0.15%
1993-1 -0.23%
-0.93% -0.02%
0.30% 0.67%
-0.21%
1994-2 0.14%
0.15% 0.86%
1.40% -0.08%
2.47%
1995-3 0.17%
-0.16% 0.33%
-0.02% -0.68%
-0.36%
1996-4 -1.04%
-0.10% 0.84%
0.86% 0.17%
0.72%
1997-1 -0.44%
1.09% 0.26%
-1.43% -0.08%
-0.60%
1998-2 -1.88%
0.42% 0.07%
1.01% 0.92%
0.55%
1999-3 0.79%
-1.62% -0.31%
0.85% 0.20%
-0.09%
2000-4 1.70%
-1.94% -1.64%
-1.72% -0.82%
-4.43%
2001-1 1.84%
1.16% -0.70%
-1.66% 2.10%
2.73%
2002-2 1.78%
-0.92% -1.87%
-0.14% 0.90%
-0.24%
2003-3 -2.25%
0.47% 0.16%
1.54% 0.00%
-0.09%
Avg -0.03%
-0.19% -0.12%
0.03% 0.27%
-0.04%
Win% 44%
44% 56%
50% 56%
44%
residential year 4
Year
Mon Tue
Wed Thur
*Fri* Totals
1988-4 -0.21%
-0.20% 0.01%
-0.01% 0.82%
0.41%
1992-4 -0.15%
-0.57% -0.46%
0.70% 0.63%
0.15%
1996-4 -1.04%
-0.10% 0.84%
0.86% 0.17%
0.72%
2000-4 1.70%
-1.94% -1.64%
-1.72% -0.82%
-4.43%
Avg 0.08%
-0.70% -0.31%
-0.04% 0.20%
-0.79%
Win%
25% 00%
50% 50%
75% 75%
SPX
Year
Mon Tue
Wed Thur
*Fri* Totals
1988-4 -0.18%
-0.08% -0.36%
-0.37% 0.73%
-0.26%
1989-1 -0.04%
0.91% 0.29%
-0.52% -0.23%
0.42%
1990-2 -0.24%
1.24% 0.05%
-0.02% 0.49%
1.51%
1991-3 0.00%
-0.45% 0.19%
-0.25% 1.18%
0.67%
1992-4 -0.21%
-0.06% -0.24%
0.91% 1.34%
1.74%
1993-1 0.38%
-0.57% -0.26%
0.32% 0.66%
0.53%
1994-2 0.56%
0.15% 1.07%
0.08% 0.76%
2.62%
1995-3 0.33%
-0.12% 0.47%
-0.77% -0.09%
-0.18%
1996-4 -1.05%
0.70% 0.76%
1.94% 0.42%
2.77%
1997-1 1.05%
0.48% -0.26%
-1.06% -0.89%
-0.68%
1998-2 -2.17%
1.90% -0.08%
1.55% 0.68%
1.89%
1999-3 -0.13%
-0.85% 0.72%
0.39% 0.16%
0.29%
2000-4 0.75%
-0.65% -0.82%
-1.40% -2.15%
-4.26%
2001-1 1.00%
0.75% 0.58%
-0.84% 0.44%
1.94%
2002-2 2.35%
-0.81% -1.31%
-0.77% 1.30%
0.75%
2003-3 -0.57%
0.66% 0.13%
1.18% -0.05%
1.35%
Avg 0.12%
0.20% 0.06%
0.02% 0.30%
0.69%
Win%
44% 50%
56% 44%
69% 75%
Presidential year 4
Year Mon
Tue Wed
Thur *Fri*
Totals
1988-4 -0.18%
-0.08% -0.36%
-0.37% 0.73%
-0.26%
1992-4 -0.21%
-0.06% -0.24%
0.91% 1.34%
1.74%
1996-4 -1.05%
0.70% 0.76%
1.94% 0.42%
2.77%
2000-4 0.75%
-0.65% -0.82%
-1.40% -2.15%
-4.26%
Avg -0.17%
-0.02% -0.17%
0.27% 0.09%
0.00%
Win%
25% 25%
25% 50%
75% 50%
The chart below covers 15 years showing the NASDAQ composite and an indicator
that plots the average percentage change over the previous 10 trading
days. For this indicator up and down days are counted the same, that is,
the absolute value of the change is used. By this measure of volatility
there were extreme distortions in 2000 with the average daily percentage
change reaching 4.8% in late April of 2000. Around the first of the year
in 2001 the average daily percentage change reached 4.4% which explains
the distortions in the tables above. The current value of the indicator
is 0.6%.
The market is going through a normal short term correction that should
last most of next week.
I expect the major indices to be lower on Friday December 17 than they were on Friday December 10.
This report is free to anyone who wants it, so please tell your friends.
They can sign up at:
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.
I publish a weekly e-letter using technical indicators to try to forecast
what the market is going to do next week. If you are interested in following
my efforts, sign up. You can get off the list at any time by replying
with "REMOVE" in the subject line.