PUG Stock Market Analysis, LLC

Elliott Wave Technical Analysis and Commentary on the Stock Market

Denali’s Turning Points 2017

This free page is dedicated to a long time PUG SMA subscriber (Denali92) who has compiled and analyzed a large amount of good historical data on market turning points as it relates to FOMC (Federal Open Market Committee), Monthly Option Expiration (OPEX), Monthly Non-Farm Payroll (NFP) and Holidays.

 

January 2017 Turning Point Preview (As of close of business on Tuesday, January 3rd):

The following is my monthly turning point preview that touches on important and interesting historical information about the upcoming month.

January is really a hit or miss month for the Turning Points. In 2014, 2015 & 2016, the market had substantial volatility with significant turns either side of opex week as well as at other times during those months. Similar post opex turns were also seen in 2008, 2009 and 2010. While in 2011, 2012 and 2013, the market generally had strong, fairly persistent rallies with limited turns. In fact, the SPX never even touched its 20 day MA in either 2012 or 2013 and it just had two brief touches of it in 2011.

Right now, there are no pointers as to what might be in store for January 2017, so we will just need to see how the month evolves.

Here are the January Turning Point highlights:

 Employment Report

Starting in 2010, the January employment report has been characterized by short term turns lasting just a few days or rally continuations. Effectively, there is NO EDGE for the January employment report, especially as it frequently occurs on the second Friday of January, though not in 2017

  • In 2016 (late report), it was a Monday after to Wednesday after deeply oversold 50pt rally.
  • In 2015 (late report), it was a 5 day 79pt employment day top and pullback in to Opex week.
  • In both 2013 and 2014, there were just very short term – minor tops on employment day.
  • In both 2011 and 2012, the SPX saw rally continuations.

The last 4 employment reports have all produced significant moves. In November (employment day) and December (day before), the market produced significant bottoms. While the September report (Wed after post holiday) and October report (Mon after) produced sharp, short pullbacks of 69 (Sep) and 55pts (Oct)

 For now, the expectation is that any move around the employment report is most likely due to the technical condition of the market than anything related to January’s specific employment report tendencies.

 MLK holiday (during opex week)

When the market is closed for the MLK holiday on opex Monday, ALL of the historical edges for both January opex and the MLK holiday (generally a turn post opex and post holiday) disappear.

  • There have been 7 instances of the MLK holiday occurring on opex Monday since 1998 and there was only 1 MAJOR Turn – a MAJOR Top on the Friday before the holiday in 2000.
  • In 2012, 2006 & 2001 the market continued to rally
  • In 2011 and 2007, there were very short term tops that were more related to opex dynamics than the holiday
  • The same goes for the brief post holiday bounce in 2005. (The market bottomed post opex)

Overall, holidays in 2016 produced a substantial number of turns – generally post holiday (except for the Thursday before MEGA bottom in February), but given the MLK during opex week history, there is no edge for this particular holiday in 2017.

 January Opex Week

While January opex week has a history of producing a lot of significant turns, most of these have occurred on Opex Friday (2015) or post opex (2008, 2009, 2010, 2014 & 2016) when the MLK holiday has been post opex.   With the MLK holiday on opex Monday, the January opex edge disappears.

Opex did produce its share of MAJOR turns in 2016 with four MAJOR bottoms in January, May, June & September, as well as two MAJOR post opex tops in April and October, so a significant turn is possible, but it is not as likely given the history of MLK holidays occurring during opex week.

 Central Banks: FOMC – Jan 31st / Feb 1st (no press conference) and ECB – Thursday, the 19th

  • The FOMC meeting is actually a Feb 1st event in 2017, so there will be no January event.
  • The ECB meets on Opex Thursday, Jan 19th. Up through March 2016, the ECB meetings did seem to help create some significant market moves, but since the post ECB meeting bottom & rally in March 2016, the ECB meetings have had very limited apparent market impact.

Other Observations

  • The December price action with the pre FOMC top on opex Tuesday has continued to follow the price action referenced in my December holiday preview that was seen in December 2005 & 2006. In 2005 and 2006, the market saw weakness until hitting the lower bollo band in January and then the market rallied (quite quickly in Jan 06 and more slowly in Jan 07)
  • Post Christmas holiday tops,: While the post Christmas holiday weakness may have ended pre the New Year’s holiday (similar pullbacks were seen in 2009 & 2010 ) at 2234, it should be remembered that the market topped post Christmas in both 2014 & 2015 and the market was weak for most of January in both of those years. For now, 2234 will be an important level to determine whether last week’s weakness was just a brief pullback or whether it is something potentially more significant.
  • Since 1998, There have been 9 Decembers that saw the SPX close above the upper bollo band at some point in December. Other than 2003, the market did see some weakness at some point after these periods. The three most recent occurrences were in 2013 (stayed elevated until declining sharply post Jan 14 opex week), 2012 (declined from opex Wed to Dec31st at the 200 day MA) and 2009 (same as in Jan 2013 – sharp decline – post Jan 2010 opex)
  • The Presidential inauguration is held on January 20th (opex day), There was no noticeable inauguration impact in 2013. The market did bottom post opex on Jan 20th in 2009 and on Monday, Jan 24th in 2005. In 2001, there was an all month rally until Jan 31st, and there was no weakness around the inauguration.
  • The current technical conditions are neutral and provide no edge.

Bottom Line

The market pullback to 2234 on Friday, Dec 31st did release some of the pressure that I had noted in my Dec 22nd holiday preview. It is too early to tell whether that was enough of a pullback in time and price or whether further weakness in both time and price is needed.

  • Unfortunately, the history of the month of January since 1998, especially with the MLK holiday during opex week offers few clues and limited turning point edges this month.
  • The post election rally and the December price action were unusual, but again with the pullback till Dec 31st, the market has followed the pattern that was seen in other Decembers that were strong in to opex week has now been followed as those other months did also see some month end weakness.

For now, my expectation is that while it is possible the traditional turning points of employment, the MLK holiday and opex will contribute to market turns during this month, I think it is equally, if not more likely that market technicals and sentiment will be more of a driving factor this month as none of the turning points at this point in time offer particularly strong probabilities.

If the market does hit an extreme that might provide an edge either pre or post the employment report, I will provide an update, otherwise I expect to be fairly quiet this month given the limited historical edges of the turning points for this particular January configuration.

ALL the BEST for 2017!

-D

 
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