Technical Market Report For April 2, 2022

The good news is:

• The market had another good week and the breadth indicators are showing some signs of life.

The Negatives

There have been very few new highs considering how close the major indices are to their all time highs.

---

The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH improved last week, but weak for an index close to its all time high.

 

The next chart is similar to the one above except it shows the Nasdaq composite (OTC) in blue and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH has been lackluster compared to the index which has risen 13.4% in the past 2 – 3 weeks. 

 

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 has been in negative territory for over 4 months. 

 

The Positives

New lows have been declining.  

The next chart is similar to the previous one except it shows the SPX in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL Ratio moved into positive territory last week,

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue.  NY NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good).  

New lows continued to decline, but remained at uncomfortably high levels.

 

The next chart is similar to the previous one except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.

This rally will last as long as the new low indicators continue moving upward.

 

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of April 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 2020 while SPX data runs from 1953 to 2020.  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 modest and mixed. 

Report for the week before the 2nd Friday of April.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday to 2nd Friday.


OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2   0.30%   0.20%  -0.33%   0.10%   0.32%   0.59%

 1970-2  -0.27%  -0.23%  -1.39%  -0.40%  -0.31%  -2.60%

 1974-2  -0.41%   1.02%   0.43%   0.20%  -0.65%   0.59%

 1978-2   0.28%  -0.08%   0.40%   1.03%   1.18%   2.80%


 1982-2  -0.14%  -0.07%  -0.19%   0.39%   0.62%   0.61%

 1986-2  -0.68%   1.14%   0.07%   0.80%   0.46%   1.79%

 1990-2   0.09%  -0.29%  -0.90%  -0.58%  -0.75%  -2.43%

 1994-2  -0.08%  -1.19%  -1.60%  -0.01%   0.09%  -2.79%

 1998-2   0.26%   0.99%   1.10%  -0.27%   0.45%   2.53%


 Avg     -0.11%   0.11%  -0.30%   0.07%   0.18%  -0.06%


 2002-2   0.89%  -2.42%   1.41%  -2.37%   1.79%  -0.70%

 2006-2  -0.64%   1.95%   0.63%  -0.35%  -0.83%   0.74%

 2010-2   0.16%   0.33%   1.58%   0.43%  -1.37%   1.13%

 2014-2  -1.16%   0.81%   1.72%  -3.10%  -1.34%  -3.07%

 2018-2   0.51%   2.06%  -0.35%   1.00%  -0.47%   2.75%


 Avg     -0.05%   0.55%   1.00%  -0.88%  -0.44%   0.17%


OTC summary for PY2 1966 - 2018 

 Avg     -0.06%   0.30%   0.18%  -0.22%  -0.06%   0.14%

 Win%       50%     57%     57%     50%     50%     64%


OTC summary for all years 1963 - 2021

 Avg      0.01%   0.07%  -0.01%   0.17%  -0.25%  -0.01%

 Win%       59%     54%     56%     56%     53%     61%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2   0.18%  -0.92%   0.37%   1.00%   0.73%   1.36%

 1958-2   0.62%   1.02%  -0.78%   0.36%   1.09%   2.31%


 1962-2  -0.77%   0.37%  -0.22%  -1.02%   0.28%  -1.37%

 1966-2   0.03%  -0.37%   0.10%   0.36%   0.13%   0.25%

 1970-2  -0.70%  -0.27%  -0.03%   0.05%  -0.33%  -1.29%

 1974-2  -0.08%   1.75%   0.75%   0.45%  -1.09%   1.78%

 1978-2   0.35%  -0.27%  -0.16%   0.97%   2.13%   3.03%


 Avg     -0.23%   0.24%   0.09%   0.16%   0.23%   0.48%


 1982-2  -0.19%  -0.01%  -0.14%   0.45%   0.40%   0.51%

 1986-2  -0.03%   2.14%   0.10%   1.15%  -0.20%   3.16%

 1990-2   0.12%  -0.02%  -1.15%  -0.77%  -0.88%  -2.70%

 1994-2   0.62%  -0.51%  -0.29%   0.03%  -0.04%  -0.20%

 1998-2  -0.09%   0.54%   0.32%  -0.99%   1.31%   1.09%


 Avg      0.09%   0.43%  -0.23%  -0.03%   0.12%   0.37%


 2002-2   0.23%  -0.67%   1.13%  -2.37%   0.66%  -1.01%

 2006-2  -0.29%   1.74%   0.17%   0.12%  -0.01%   1.72%

 2010-2   0.18%   0.07%   1.12%   0.08%  -1.61%  -0.17%

 2014-2  -1.08%   0.38%   1.09%  -2.09%  -0.95%  -2.65%

 2018-2   0.33%   1.67%  -0.55%   0.82%  -0.29%   1.99%


 Avg     -0.13%   0.64%   0.59%  -0.69%  -0.44%  -0.02%


SPX summary for PY2 1954 - 2018 

 Avg     -0.03%   0.39%   0.11%  -0.08%   0.08%   0.46%

 Win%       53%     53%     53%     71%     47%     59%


SPX summary for all years 1953 - 2021

 Avg      0.12%   0.14%   0.04%   0.01%  -0.06%   0.25%

 Win%       59%     57%     55%     55%     52%     58%

 

Conclusion

This continues to look like a counter trend, bear market rally 

Although new lows have decreased they have remained at uncomfortably high levels. 

After a cycle bottom new lows quickly disappear. 

The strongest sectors last week were Utilities (same as last week) and Precious metals while the weakest were Electronics and Banks.

I expect the major averages to be higher on Friday April 8 than they were on Friday April 1.

Last week the Dow Jones Industrial Average was down while the other major indices were up so I am calling last week's negative forecast a tie.