Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Stock Markets Oversold Due for a Relief Rally

Stock-Markets / US Stock Markets Oct 05, 2008 - 01:33 PM GMT

By: Mike_Burk

Stock-Markets

Best Financial Markets Analysis ArticleThe good news is: We are probably near a tradable rally.

Short Term - Last Monday the financial system bailout was rejected for lack of pork, that oversight was corrected Friday. News of the bailout failure sent volume ratios on both the NYSE and NASDAQ to extremes not seen since October 19, 1987. Other breadth ratios hit extremes rarely seen.


The charts below each cover 3 months showing the NASDAQ composite (OTC) in blue and the ratio of NASDAQ advancing issues to declining issues in green. The ratio is calculated by dividing advancing issues by advancing issues + declining issues. Dashed vertical lines have been drawn on the 1st trading day of each month and dashed horizontal lines have been drawn at 10% intervals for the indicator. The charts show every extreme low for the indicator over the past 25 years.

The indicator had a value of 13.1 last Monday.

The next chart shows the same indicator and index in early 2007 when, in late February the indicator hit a value of 9.0. Conditions then were different from now because the index was only a few days off a high.

The next chart covers approximately the 2nd quarter of 2000. In mid April the indicator hit a value of 11.9. Following that extreme the index rallied for a couple weeks before falling to a new low about a month later.

The next chart covers the period from August 4, 1998 to November 2, 1998. The indicator hit a low of 13.4 in late August. Following the August low the index rallied for about a month before falling to a new low.

The next chart covers the 1990 decline. The indicator hit a low of 12.9 in late August, a short rally followed and the final index low was hit about 6 weeks later.

The most extreme example was the 1987 crash when the indicator fell to 3.7. The final index low was hit about 6 weeks later.

Every time the indicator has hit an extreme near its level of last Monday there has been a short rally and a lower index low, usually about 6 weeks later.

Intermediate Term

Last Monday there were 1170 new lows on the NYSE and 593 on the NASDAQ. On Friday as all of the major indices were hitting new lows the number of new lows had fallen to 678 on the NYSE and 398 on the NASDAQ. Any of those numbers is high enough to imply a high likelihood of a retest.

The chart below covers the past year showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in black. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

The indicator has not confirmed the progressively lower index lows since January, but the value levels of the indicator have remained dangerously high.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and the indicator calculated from NYSE new lows (NY NL) in blue.

This chart is not as pretty as the one above in that the indicator confirmed the July and mid September lows.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of October 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 of October during the 4th year of the Presidential Cycle. OTC data covers the period from 1963 - 2007 and SPX data from 1953 - 2007. Prior to 1953 the market traded 6 days a week so that data has been ignored. There are summaries for both the 4th year of the Presidential Cycle and all years combined.

Returns for the week have been modestly positive over all years, however, during the 4th year of the Presidential Cycle returns have been modestly negative.

Report for the week before the 2nd Friday of October.
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 0.07% 0.19% 0.30% 0.35% 1.04% 1.94%
1968-4 -0.12% -0.53% 0.00% 0.42% -0.35% -0.58%
1972-4 0.30% 0.40% -0.35% -0.54% -0.53% -0.73%
1976-4 0.02% -0.78% -0.80% 0.67% -0.28% -1.17%
1980-4 1.33% 0.08% 0.51% 0.18% 0.13% 2.24%
1984-4 -0.37% -0.20% -0.32% 0.59% 0.56% 0.27%
Avg 0.23% -0.21% -0.24% 0.26% -0.09% 0.01%
1988-4 -0.05% -0.05% -0.71% 0.24% 0.29% -0.28%
1992-4 -1.12% 0.94% -0.24% 0.82% -0.59% -0.18%
1996-4 0.26% -0.86% -0.18% -0.08% 0.91% 0.06%
2000-4 -0.16% -3.43% -2.22% -2.96% 7.87% -0.90%
2004-4 0.53% 0.16% 0.79% -1.14% -1.47% -1.13%
Avg -0.11% -0.65% -0.51% -0.62% 1.41% -0.48%
OTC summary for Presidential Year 4 1964 - 2004
Avg 0.06% -0.37% -0.32% -0.13% 0.69% -0.04%
Win% 55% 45% 30% 64% 55% 36%
OTC summary for all years 1963 - 2007
Avg 0.00% -0.27% -0.09% 0.32% 0.53% 0.50%
Win% 62% 47% 50% 71% 69% 58%
SPX Presidential Year 4
Year Mon Tue Wed Thur Fri Totals
1956-4 -0.04% -0.50% 1.39% -0.06% 0.41% 1.19%
1960-4 0.20% 0.15% -0.13% 0.78% 0.53% 1.53%
1964-4 0.45% 0.06% 0.01% 0.28% 0.21% 1.02%
1968-4 -0.01% 0.04% 0.00% -0.43% -0.11% -0.51%
1972-4 0.26% 0.08% -0.45% -0.82% -0.63% -1.56%
1976-4 -0.13% -0.77% -0.25% 0.55% -0.95% -1.55%
1980-4 1.86% -0.55% 0.50% -0.46% -0.57% 0.76%
1984-4 -0.34% -0.28% 0.27% 0.41% 0.86% 0.92%
Avg 0.33% -0.30% 0.02% -0.15% -0.28% -0.39%
1988-4 0.06% -0.11% -1.42% 0.45% 0.10% -0.92%
1992-4 -0.71% -0.10% -0.72% 0.87% -1.25% -1.90%
1996-4 0.27% -0.39% -0.56% -0.31% 0.87% -0.11%
2000-4 -0.49% -1.07% -1.62% -2.55% 3.34% -2.39%
2004-4 0.32% -0.06% 0.67% -1.00% -0.75% -0.82%
Avg -0.11% -0.35% -0.73% -0.51% 0.46% -1.23%
SPX summary for Presidential Year 4 1956 - 2004
Avg 0.13% -0.27% -0.19% -0.18% 0.16% -0.33%
Win% 54% 31% 42% 46% 54% 38%
SPX summary for all years 1953 - 2007
Avg 0.12% -0.19% 0.12% 0.03% 0.16% 0.24%
Win% 57% 35% 46% 44% 55% 56%

Money supply (M2)

The chart below was provided by Gordon Harms. The headlines tell us that central banks world wide have been dumping large amounts of money into the system yet it has not appeared in M2.

Conclusion

The market is oversold and due for a relief rally which should be followed by a retest of last Friday's lows or lower lows reached early next week.

I expect the major indices to be higher on Friday October 10 than they were on Friday October 3.

Last weeks positive forecast was a miss.

Thank you,

By Mike Burk
To subscribe to this report : http://alphaim.net/signup.html

Gordon Harms produces a Power Point for our local timing group. You can get a copy of that at: http://www.stockmarket-ta.com/ .

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 are provided for information purposes only and should not be construed in any way as investment advice. Furthermore, the opinions expressed may change without notice.

Mike Burk Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules