Technical market report for May 3,
2008
The good news
is:
·
All of the major indices hit
multi month highs last
week.
Short
Term
During the rally off the January lows new highs on the
NYSE declined.
During last week's rally new highs on the NYSE also
declined.
Prices declined sharply following the rally off the
January lows.
The chart below covers the past year showing the S&P
500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs in
green. Dashed vertical lines have been drawn on the
1st trading day of each month; the vertical line is red on the
1st trading day of the year. I have drawn arrows
pointing out the late January rally and the current
period.
The next chart covers the same period showing an average
of the Fidelity select funds in red and an indicator calculated by subtracting
momentum of new lows from momentum of new highs of the select funds in
blue. New highs and new lows of the funds have been
calculated over the trailing 6
weeks.
The indicator fell just ahead of the mid October highs,
and has been falling for the past week. It did not give a
leading signal of the failed rally off the January
lows.
Intermediate
Term
You like to see volume increasing during a rally and
that has not been
happening.
The chart below covers the past 9 months showing the
NASDAQ composite (OTC) in blue and a 5% trend (39 day EMA) of NASDAQ total
volume in brown. Volume has been falling off since the March
lows.
The next chart is similar to the one above except the
index is the SPX and the indicator has been calculated from NYSE total
volume.
Seasonality
Next week includes the 5 trading days prior to the
2nd Friday in May during the 4th year of the Presidential
Cycle.
The tables show the daily return on a percentage basis
for the 5 trading days prior to the 2nd Friday in May during the
4th year of the Presidential Cycle. OTC data
covers the period from 1963 - 2007 and S&P 500 (SPX) data from 1953 -
2007. There are summaries for both the 4th 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.
By all measures next week has been modestly negative
although OTC data has been skewed by the 7.51% loss in
2000.
Report for the week before
the 2nd Friday of May
The number following the year
is the position in the presidential
cycle.
Daily returns from Monday to
2nd Friday.
OTC Presidential Year
4
Year
Mon
Tue Wed
Thur Fri
Totals
1964-4
0.85% -0.36%
0.59% 0.25%
0.18%
1.51%
1968-4
0.09% 0.18%
0.53% 0.26%
-0.56%
0.51%
1972-4
-0.63% -2.21%
0.79% 0.93%
1.16%
0.05%
1976-4
0.59% 0.04%
0.06% -0.46% -0.49%
-0.26%
1980-4
0.56% 0.84%
0.95% -0.22%
-0.14%
1.99%
1984-4
0.18% 0.43%
0.07% 0.12%
-0.93%
-0.12%
Avg
0.16% -0.14%
0.48% 0.13%
-0.19%
0.43%
1988-4
-0.83% -0.22%
-1.65% 0.27%
0.61%
-1.83%
1992-4
0.93% 0.78%
0.22% -0.37%
-0.24%
1.32%
1996-4
0.14% -0.30%
0.06% 0.37%
1.26%
1.53%
2000-4
-3.86% -2.30%
-5.59% 3.39%
0.84%
-7.51%
2004-4
-1.14% 1.86%
-0.30% 0.02%
-1.13%
-0.69%
Avg
-0.95% -0.04%
-1.45% 0.74%
0.27%
-1.43%
OTC summary for Presidential
Year 4 1964 - 2004
Avg
-0.28% -0.11%
-0.39% 0.42%
0.05%
-0.32%
Win%
64%
55%
73%
73%
45%
55%
OTC summary for all years
1963 - 2007
Avg
-0.11% -0.12% -0.01%
-0.04% 0.09%
-0.19%
Win%
51%
49%
53%
60%
60%
53%
SPX Presidential Year
4
Year
Mon
Tue Wed
Thur Fri
Totals
1956-4
-0.60% -0.41% -0.17%
-1.63% -0.08%
-2.89%
1960-4
0.09% -0.69%
0.28% 0.51%
0.82%
1.01%
1964-4
0.37% 0.51%
0.22% 0.11%
-0.18%
1.03%
1968-4
-0.31% 0.56%
0.01% -0.53%
0.11%
-0.16%
1972-4
-0.46% -1.32%
0.65% 0.33%
0.58%
-0.22%
1976-4
1.20% -0.15% -0.17%
-0.59% -0.80%
-0.52%
1980-4
0.76% -0.12%
0.88% -0.98% -1.33%
-0.80%
1984-4
0.23% 0.66%
-0.26% -0.07% -0.94%
-0.38%
Avg
0.28% -0.07%
0.22% -0.37% -0.48%
-0.42%
1988-4
-0.37% 0.42%
-1.67% 0.21%
1.15%
-0.25%
1992-4
1.06% -0.02% -0.01%
-0.23% 0.05%
0.86%
1996-4
-0.13% -0.40%
1.02% 0.10%
1.03%
1.63%
2000-4
-0.59% -0.85%
-2.05% 1.79%
0.94%
-0.77%
2004-4
-1.05% 0.77%
0.17% -0.08% -0.07%
-0.26%
Avg
-0.21% -0.02%
-0.51% 0.36%
0.62%
0.24%
SPX summary for Presidential
Year 4 1956 - 2004
Avg
0.02% -0.08% -0.09%
-0.08% 0.10%
-0.13%
Win%
46%
38%
54%
46%
54%
31%
SPX summary for all years
1953 - 2007
Avg
-0.14% -0.01% -0.01%
-0.13% 0.05%
-0.24%
Win%
39%
47%
53%
47%
56%
42%
Money Supply
(M2)
The money supply chart has been provided by Gordon
Harms.
Money supply has been falling
sharply.
Conclusion
Over the past week breadth indicators deteriorated,
money supply growth has been contracting and seasonally the coming week has a
modestly negative bias.
I expect the major indices to be lower on Friday May 9
than they were on Friday May
2.
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Thank you,
Mike Burk
YTD
W9/L5/T4
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.
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