Technical Market Report For January 25

The good news is the market had a rough week, but, there is little reason for concern since the recent all time highs were confirmed by the breadth indicators.

The Negatives

The secondaries led the way down last week and new lows approached levels of concern.

The Positives

The recent highs were confirmed by breadth.

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 hit its high a few days after the index.

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 hit its high a day before the index.

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 fell to a still very strong 81%.

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 also fell finishing the week at a very strong 85%.

Seasonality

Next week includes the last five trading days of January during the fourth 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 1928 to 2018.There are summaries for both the 4th year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been modestly positive.  

Report for the last 5 trading days of January.

The number following the year represents its position in the Presidential Cycle.

The number following the daily return represents the day of the week;

1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 4 (PY4)

               Day5Day4 Day3Day2 Day1 Totals

 1964-4 0.00% 1 -0.16% 2 0.27% 3 -0.35% 4 0.00% 5-0.24%

 1968-4-0.08% 4 -0.34% 5 0.50% 1 0.35% 2 -0.86% 3-0.44%

 1972-4-0.16% 2 0.08% 3 0.84% 4 0.91% 5 0.36% 1 2.03%

 1976-4-0.25% 1 -0.34% 2-0.15% 3 1.80% 4 1.04% 5 2.10%

 1980-4 0.29% 5 0.63% 1-0.26% 2 0.63% 3 0.28% 4 1.57%

 1984-4-0.53% 3 -0.63% 4-0.88% 5 -1.45% 1 -0.30% 2-3.78%

 1988-4 0.86% 1 -0.38% 2 0.17% 3 0.75% 4 0.67% 5 2.08%

 1992-4-0.59% 1 0.05% 2-0.80% 3 0.82% 4 -0.19% 5-0.71%

 1996-4-0.72% 4 0.48% 5 0.14% 1 0.84% 2 0.81% 3 1.56%

 Avg -0.14% 0.03%-0.32% 0.32% 0.26% 0.14%

 2000-4 1.74% 2 -2.34% 3-0.74% 4 -3.78% 5 1.37% 1 -3.75%

 2004-4 1.41% 1 -1.75% 2-1.83% 3 -0.44% 4 -0.10% 5-2.71%

 2008-4-1.47% 5 1.02% 1 0.35% 2 -0.38% 3 1.74% 4 1.25%

 2012-4 1.14% 3 -0.46% 4 0.40% 5 -0.16% 1 0.07% 2 0.98%

 2016-4-1.58% 1 1.09% 2-2.18% 3 0.86% 4 2.38% 5 0.57%

 Avg0.25% -0.49%-0.80% -0.78% 1.09% -0.73%

OTC summary for PY4 1964 - 2016

Averages0.00% -0.22%-0.30% 0.03% 0.52% 0.04%

% Winners 36% 43% 50% 57% 64% 57%

MDD1/28/20006.73% -- 1/30/20044.07% -- 1/31/1984 3.73%

OTC Summary for all years 1963 - 2019

Averages -0.02% 0.16% 0.06% 0.00% 0.27% 0.45%

% Winners 46% 60% 58% 55% 65% 58%

MDD 1/28/20006.73% -- 1/30/20095.26% -- 1/30/1970 4.76%

SPX PY4

               Day5Day4 Day3Day2 Day1 Totals

 1928-4 0.63% 4 0.34% 5-0.62% 6 -0.51% 1 0.46% 2 0.29%

 1932-4 1.34% 2 -1.93% 3-1.47% 4 -1.12% 5 -0.63% 6-3.81%

 1936-4 0.29% 1 0.14% 2 1.00% 3 -0.49% 4 1.63% 5 2.57%

 1940-4-0.08% 5 0.08% 6 0.00% 1 -0.58% 2 -0.33% 3-0.91%

 1944-4-1.01% 3 -0.17% 4 0.60% 5 0.00% 6 0.34% 1-0.25%

 1948-4 0.14% 2 1.05% 3 1.10% 4 0.20% 5 0.07% 6 2.56%

 1952-4 0.16% 6 0.08% 1-0.16% 2 -1.38% 3 -0.37% 4-1.67%

 1956-4 0.16% 3 -0.59% 4-0.25% 5 0.35% 1 0.74% 2 0.39%

 Avg -0.13% 0.09% 0.26% -0.28% 0.09% 0.03%

 1960-4-1.05% 1 0.14% 2-0.25% 3 -1.04% 4 -0.93% 5-3.12%

 1964-4-0.04% 1 0.03% 2-0.61% 3 0.09% 4 0.44% 5-0.09%

 1968-4 0.14% 4 0.16% 5-0.11% 1 -0.49% 2 -0.70% 3-1.00%

 1972-4 0.20% 2 -0.27% 3 0.98% 4 0.64% 5 -0.21% 1 1.33%

 1976-4 0.47% 1 -0.61% 2-0.55% 3 1.60% 4 0.75% 5 1.67%

 Avg -0.05% -0.11%-0.11% 0.16% -0.13%-0.24%

 1980-4-0.08% 5 1.09% 1-0.68% 2 0.99% 3 -0.90% 4 0.42%

 1984-4-0.66% 3 -0.36% 4-0.18% 5 -0.65% 1 0.33% 2-1.53%

 1988-4 2.30% 1 -1.03% 2-0.08% 3 1.57% 4 1.49% 5 4.25%

 1992-4-0.12% 1 -0.01% 2-1.11% 3 0.31% 4 -0.69% 5-1.61%

 1996-4-0.47% 4 0.74% 5 0.42% 1 0.95% 2 0.93% 3 2.57%

 Avg0.19% 0.09%-0.33% 0.63% 0.23% 0.82%

 2000-4 0.58% 2 -0.42% 3-0.39% 4 -2.75% 5 2.52% 1 -0.46%

 2004-4 1.21% 1 -0.98% 2-1.36% 3 0.50% 4 -0.26% 5-0.89%

 2008-4-1.59% 5 1.76% 1 0.62% 2 -0.48% 3 1.68% 4 1.98%

 2012-4 0.87% 3 -0.58% 4-0.16% 5 -0.25% 1 -0.05% 2-0.16%

 2016-4-1.56% 1 1.41% 2-1.09% 3 0.55% 4 2.48% 5 1.79%

 Avg -0.10% 0.24%-0.48% -0.48% 1.27% 0.45%

SPX summary for PY4 1928 - 2016

Averages0.08% 0.00%-0.19% -0.09% 0.38% 0.19%

% Winners 57% 52% 26% 48% 57% 48%

MDD1/30/19325.05% -- 1/28/20003.53% -- 1/29/1960 3.08%

SPX summary for all years 1928 - 2019

Averages -0.03% 0.14% 0.02% 0.09% 0.26% 0.48%

% Winners 53% 52% 47% 59% 62% 57%

MDD 1/29/19386.33% -- 1/30/20095.52% -- 1/30/1932 5.05%

Conclusion

Last week's decline could go on for a while longer, but since the recent highs were confirmed by breadth it is very likely there will be more all time highs for the blue chip indices. Utilities continued as the strongest sector while Precious metals went from one of the worst performers to one of the best in a week. Energy remained the worst performer and banks joined energy near the bottom.

I expect the major averages to be higher on Friday, January 31,than they were on Friday, January 24. 

Last weeks positive forecast was a miss.