Technical Market Report - Monday, June 4
The good news is:
The Russell 2000 (R2K) closed at an all-time high last week.
The Negatives
The market continued its slow move upward during a seasonally positive period.
The first chart covers the past 6 months showing the Nasdaq composite (OTC) in blue and a 10% trend (19 day EMA) of Nasdaq new lows (OTC NL) in brown. Dashed vertical lines have been drawn on the 1st trading day of each month. OTC NL has been plotted on an inverted Y axis so fewer new lows move the indicator upward (up is good).
OTC NL continued moving slowly upward while index moved quickly upward.
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NL, in blue, has been calculated with NYSE data.
NY NL has flattened out even more than OTC NL. New lows are not diminishing as quickly as they would be in a strong market.
The next chart covers the past 6 months showing the OTC in blue and a 10% trend of NASDAQ new highs (OTC NH) in green.
OTC NH turned upward, but with the index less than 1% off its all-time high OTC NH is far from confirming the index move.
The next chart is similar to the one above one except it shows the SPX in red and NY NH, in green, has been calculated with NYSE data.
Neither the SPX or NY NH are showing any vigor.
The Positives
Movement of the breadth indicators has been modestly positive.
The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY 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.
NY HL Ratio rose finishing the week at a modestly positive 66%.
The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated with NASDAQ data.
OTC HL Ratio finished the week at a comfortable 77%.
Seasonality
Next week includes the 5 trading days prior to the 2nd Friday of June during the 2nd 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 2018 while SPX data runs from 1953 to 2018. There are summaries for both the 2nd 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 negative by all measures.
Report for the week before the 2nd Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.
OTC Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1966-2 0.25% -0.52% -0.63% 0.00% 0.51% -0.39%
1970-2 -2.19% -0.49% 1.17% 0.13% -1.12% -2.50%
1974-2 0.25% -0.69% -0.29% 0.17% -0.58% -1.14%
1978-2 0.88% 0.61% 0.20% 0.72% 0.34% 2.76%
1982-2 -0.56% -0.32% -1.35% 0.25% 1.27% -0.71%
1986-2 -1.38% -0.48% 0.66% 0.28% 0.77% -0.15%
1990-2 0.75% -0.21% 0.08% -0.19% -0.69% -0.27%
1994-2 0.14% -0.56% -1.29% -0.12% 0.74% -1.09%
Avg -0.03% -0.19% -0.34% 0.19% 0.49% 0.11%
1998-2 0.27% 0.73% -1.53% -1.33% -0.27% -2.12%
2002-2 -0.31% -2.19% 1.47% -1.47% 0.53% -1.97%
2006-2 -2.24% -0.32% -0.51% -0.30% -0.48% -3.85%
2010-2 -2.04% -0.15% -0.54% 2.77% 1.12% 1.16%
2014-2 0.34% 0.04% -0.14% -0.79% 0.30% -0.24%
Avg -0.80% -0.38% -0.25% -0.22% 0.24% -1.40%
OTC summary for Presidential Year 2 1966 - 2014
Avg -0.45% -0.35% -0.21% 0.01% 0.19% -0.81%
Win% 54% 23% 38% 50% 62% 15%
OTC summary for all years 1963 - 2017
Avg -0.21% -0.19% 0.04% 0.06% 0.03% -0.27%
Win% 49% 29% 54% 65% 58% 36%
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.38% -2.24% -0.67% 0.67% 0.85% -1.77%
1958-2 -0.16% -0.20% 0.02% 0.58% 0.60% 0.85%
1962-2 -3.55% 0.52% 1.42% 0.02% 0.09% -1.50%
1966-2 -0.74% -0.69% 0.12% 0.67% 1.10% 0.45%
1970-2 0.16% -0.05% -1.01% -1.36% -0.32% -2.59%
1974-2 0.59% -0.88% -0.24% 0.30% -1.13% -1.35%
Avg -0.74% -0.26% 0.06% 0.04% 0.07% -0.83%
1978-2 1.84% 0.37% -0.20% 0.09% -0.28% 1.83%
1982-2 0.03% -0.44% -0.58% 0.57% 1.49% 1.05%
1986-2 -2.32% -0.16% 0.65% 0.15% 1.76% 0.07%
1990-2 1.17% -0.21% -0.46% -0.50% -1.22% -1.22%
1994-2 -0.27% -0.15% -0.25% 0.18% 0.18% -0.32%
Avg 0.09% -0.12% -0.17% 0.10% 0.38% 0.28%
1998-2 0.16% 0.24% -0.55% -1.59% 0.38% -1.35%
2002-2 0.31% -1.66% 0.66% -1.05% -0.23% -1.97%
2006-2 -1.78% -0.11% -0.61% 0.14% -0.45% -2.81%
2010-2 -1.35% 1.10% -0.59% 2.95% 0.44% 2.54%
2014-2 0.09% -0.02% -0.35% -0.71% 0.31% -0.68%
Avg -0.51% -0.09% -0.29% -0.05% 0.09% -0.85%
SPX summary for Presidential Year 2 1954 - 2014
Avg -0.39% -0.29% -0.17% 0.07% 0.22% -0.55%
Win% 50% 25% 31% 69% 63% 38%
SPX summary for all years 1953 - 2017
Avg -0.22% -0.06% 0.04% 0.09% 0.13% -0.02%
Win% 45% 43% 48% 58% 58% 45%
Conclusion
The breadth indicators have been modestly positive.
Seasonality for the next two weeks is negative.
I expect the major averages to be lower on Friday, June 8 than they were on Friday, June 1.
Last week the Dow Jones Industrial Average was down while the other indices were up, so I am calling last weeks positive forecast a tie.