Technical Market Report For October 14, 2017

The good news is:
The Nasdaq composite (OTC) closed at an all time high Friday and the blue chip indices closed at all time highs earlier in the week.

The Negatives

The market is overbought and the secondaries represented by the Russell 2000 (R2K) declined a little last week. New lows picked up a little, but remain at non threatening levels. Seasonality for next week is barely positive.

The Positives

The blue chip indices hit all time highs last week confirmed by NYSE new highs.

The first chart covers the past 6 months showing the S&P 500 (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 is leading the way upward.

The next chart is similar to the one above except it shows the OTC in blue and OTC NH has been calculated from Nasdaq data.

OTC NH has stalled at a high level. 

The next chart 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 50%, neutral, level.

OTC HL Ratio appears to be rolling over, but is still very strong at 86%.

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

NY HL Ratio also declined a bit finishing the week at a very strong 90%. 

Seasonality
Because of relatively rare occurrences of extreme volatility in October, daily changes have been limited to 2%.  That is any daily move, up or down, greater than 2% is entered at 2% for the purposes of the Seasonal calculations.

Next week includes the 5 trading days prior to the 3rd Friday of October during the 1st year of the Presidential Cycle.  The tables below show the daily change, on a percentage basis for that period.

OTC data covers the period from 1963 to 2016 while SPX data runs from 1953 to 2016.  There are summaries for both the 1st year of the Presidential Cycle and all years combined.  Prior to 1953 the market traded 6 days a week so that data has been ignored.

Average returns for the coming week have been modestly positive and better during the 1st year of the Presidential Cycle than other years.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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