Chart of the Week - Stock Returns from August to October Forecast U.S President

The chart of the week comes from LPL Financial Research and shows that stock market performance in the August-October period has an uncanny ability to determine the winner of the U.S presidential race. A strong performance has often favored the incumbent while negative returns favor the challenger as can be seen below:



As things stand it is not looking good for the democrats as per the info-graphic below from
Adam Hamilton of Zeal LLC:

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning August 1

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2174, -0.07%	Neutral	Neutral
Nifty	8639, 1.14%	Neutral**	Bullish
China Shanghai Index	2979, -1.11%	Bearish	Bearish
Gold	1358, 2.61%	Bullish	Bullish
WTIC Crude	41.60, -5.86%	Bearish	Bearish
Copper	2.22, -0.63%	Bearish	Bearish
Baltic Dry Index	656, -8.64%	Bearish	Bearish
Euro	1.117, 1.80%	Bullish	Bullish
Dollar/Yen	102.10, -3.83%	Bearish	Bearish
Dow Transports	7846, -1.50%	Bearish	Bearish
High Yield (ETF)	36.06, -0.83%	Bearish	Bearish
US 10 year Bond Yield	1.46%, -7.13%	Bullish	Bullish
Nyse Summation Index	1228, -2.23%	Bearish	Neutral
US Vix	11.87, -1.25%	Bullish	Bullish
20 DMA, S and P 500	2149, Above	Bullish	Neutral
50 DMA, S and P 500	2108, Above	Bullish	Neutral
200 DMA, S and P 500	2041, Above	Bullish	Neutral
20 DMA, Nifty	8506, Above	Neutral	Bullish
50 DMA, Nifty	8281, Above	Neutral	Bullish
200 DMA, Nifty	7846, Above	Neutral	Bullish
India Vix	14.92, -3.74%	Neutral	Bullish
Dollar/Rupee	66.72, -0.64%	Neutral	Bullish
Overall	S & P 500	Nifty
Bullish Indications	7	10
Bearish Indications	8	7
Outlook	Bearish	Bullish
Observation	The S and P 500 was unchanged and the Nifty was up last week. Indicators are mixed. Markets are at resistance. Time to tighten those stops.
On the Horizon	China – PMI, Australia – Rate decision, New Zealand – Employment data, U.K – BOE rate decision Canada – Employment data, US – ISM data, Employment data
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, FXCM
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 was unchanged and the Nifty was up last week. Signals are mixed for the upcoming week. The Vix is suggesting complacency and flight to safety into the Yen, US bonds and Gold has resumed.  The markets are stalling at significant long term resistance and are likely to continue major breakdowns in 2016 after this rally concludes. The critical levels to watch are 2190 (up) and 2160 (down) on the S & P and 8700 (up) and 8550 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. You can also check out support and resistance levels of the S and P 500 and Nifty Indices. Love your thoughts and feedback.

Some Developing Non Conformations in the Stock Market

With yet another Fed day arriving there are a number of non conformations in the market which have not matched recent highs in the stock market. Charts are courtesy nasdaq.com:


1) No new highs in the Transports in over 1.5 years:


2) The same holds for the Russel 2000 small cap Index:


 3) Financial stocks are lagging way behind:


4) Oil stocks are nowhere near their yearly highs:


5) Base metals like copper and related stocks are lagging way behind as well:


6) Last but not the least the CBOE Volatility Index the Vix (Chart from marketwatch.com) is yet to take out its yearly lows: