Technical Market Report - Monday, August 6
The good news is:
Most of the major indices are near their all-time highs.
The Negatives
The breadth indicators deteriorated while the indices rose last week.
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 highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.
OTC NH fell while the index rose last week.
The next chart is similar to the one above one except it shows the S&P 500 (SPX ) in red and NY NH, in green, has been calculated with NYSE data.
The SPX had a good week, but, NY NH went nowhere.
The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC 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.
OTC HL Ratio went negative last week.
The Positives
The next chart is similar to the one above except it shows the SPX in red and NY HL Ratio, in blue, has been calculated with NYSE data.
NY HL Ratio fell slightly but remained positive at 68%.
Seasonality
Next week includes the 5 trading days prior to the 2nd Friday of August 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 modestly positive over all years and modestly negative during the 2nd year of the Presidential Cycle.
Report for the week before the 2nd Friday of August.
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 0.70% -0.14% 0.44% 0.09% -0.14% 0.95%
1970-2 -0.87% -1.71% -0.44% -0.98% -1.28% -5.29%
1974-2 0.39% 1.23% 1.63% -1.42% 0.04% 1.87%
1978-2 0.39% 0.22% 0.88% -0.05% 0.32% 1.76%
1982-2 -1.35% -0.04% -0.34% -0.58% -0.44% -2.75%
1986-2 -1.08% 0.02% -0.55% 0.09% 0.22% -1.29%
1990-2 -4.17% 0.51% 1.41% 1.29% -1.20% -2.17%
1994-2 0.25% 0.30% 0.77% 0.00% 0.47% 1.79%
Avg -1.19% 0.20% 0.43% 0.19% -0.12% -0.53%
1998-2 -0.41% -2.53% 1.83% -1.26% -0.68% -3.05%
2002-2 -3.36% 4.44% 1.70% 2.78% -0.79% 4.77%
2006-2 -0.60% -0.56% -0.03% 0.56% -0.68% -1.31%
2010-2 0.75% -1.24% -3.01% -0.83% -0.77% -5.09%
2014-2 0.72% -0.71% 0.05% -0.46% 0.83% 0.43%
Avg -0.58% -0.12% 0.11% 0.16% -0.42% -0.85%
OTC summary for Presidential Year 2 1966 - 2014
Avg -0.67% -0.02% 0.33% -0.07% -0.31% -0.72%
Win% 46% 46% 62% 42% 38% 46%
OTC summary for all years 1963 - 2017
Avg -0.28% 0.13% 0.11% 0.03% 0.05% 0.04%
Win% 45% 53% 59% 61% 51% 58%
SPX Presidential Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 -0.86% 0.83% 1.15% -0.42% 0.42% 1.13%
1958-2 0.95% -0.40% -0.61% 0.65% 0.59% 1.18%
1962-2 -0.64% -0.68% 0.26% -0.07% 0.14% -0.98%
1966-2 -0.30% -0.31% -0.46% -0.11% 0.18% -0.99%
1970-2 -1.40% -0.50% -0.53% -0.88% 0.56% -2.74%
1974-2 0.89% 1.55% 2.65% -1.31% -0.87% 2.91%
Avg -0.10% -0.07% 0.26% -0.34% 0.12% -0.12%
1978-2 -0.36% 0.44% 0.47% -0.80% 0.29% 0.04%
1982-2 -0.61% -0.23% -0.23% -0.18% 1.40% 0.15%
1986-2 0.46% 0.44% -0.08% 0.08% -0.07% 0.84%
1990-2 -3.02% 0.12% 1.05% 0.47% -1.30% -2.68%
1994-2 0.18% 0.01% 0.52% -0.31% 0.67% 1.06%
Avg -0.67% 0.16% 0.35% -0.15% 0.20% -0.12%
1998-2 -0.58% -1.30% 1.42% -0.86% -1.13% -2.45%
2002-2 -3.43% 2.99% 2.00% 3.27% 0.35% 5.19%
2006-2 -0.28% -0.34% -0.44% 0.46% -0.40% -0.99%
2010-2 0.55% -0.59% -2.82% -0.54% -0.40% -3.81%
2014-2 0.72% -0.97% 0.00% -0.56% 1.15% 0.35%
Avg -0.60% -0.04% 0.03% 0.36% -0.09% -0.34%
SPX summary for Presidential Year 2 1958 - 2014
Avg -0.48% 0.07% 0.27% -0.07% 0.10% -0.11%
Win% 38% 44% 56% 31% 63% 56%
SPX summary for all years 1953 - 2017
Avg -0.28% 0.17% 0.06% 0.05% 0.07% 0.07%
Win% 42% 58% 53% 49% 54% 57%
Conclusion
Last week all of the major indices rose while the breadth indicators declined.
I expect the major averages to be lower on Friday, August 10 than they were on Friday, August 3.
Last weeks negative forecast was a miss.