Technical Market Report For May 23

The good news is the market had a good week.

The Negatives

The Plunge Protection Team (PPT), also known as The Working Group on Financial Markets woke up Monday and took the major indices up for one of their best days ever..

The first chart covers the past six 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 of the 1st trading day of each month.

The weakness of OTC NH indicates minimal broad market support. 

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH, in green has been calculated with NYSE data.

Ditto the NYSE.

The Positives

New lows which had been building disappeared in last Monday’s massive rally.

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 blue.Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio fell has been unusually volatile; last week moving from an uncomfortably weak position to a comfortably strong one.

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 continued moving upward finishing the week at a strong 83%.

Seasonality

Next week includes the last four trading days of May 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 2019 while SPX data runs from 1928 to 2019. There are summaries for both the fourth year of the Presidential Cycle and all years combined. 

Returns for the coming week have been positive by all measures.

Report for the Last 4 days of May

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.

Break down by Presidential Years

OTC Presidential Year 4 (PY4)

               Day4 Day3 Day2 Day1 Totals

 1964-4 0.03% 1-0.28% 2 0.33% 3 0.15% 4 0.23%

 1968-4 0.67% 1 0.29% 2 0.46% 3 0.69% 5 2.12%

 1972-4 0.25% 4 0.11% 5-0.37% 2-0.69% 3-0.70%

 1976-4-0.39% 2 0.33% 3-0.36% 4 0.30% 5-0.12%

 1980-4 0.41% 2 0.40% 3-0.40% 4 0.24% 5 0.65%

 1984-4-0.07% 5-1.11% 2-0.29% 3 0.38% 4-1.09%

 1988-4 0.16% 3 0.43% 4-0.17% 5 1.00% 2 1.41%

 1992-4-0.80% 2 0.30% 3 0.54% 4 0.83% 5 0.87%

 1996-4-0.92% 2-0.87% 3 0.64% 4 0.80% 5-0.34%

 Avg -0.24%-0.17% 0.06% 0.65% 0.30%

 2000-4-1.99% 4-0.01% 5 7.94% 2-1.69% 3 4.24%

 2004-4 2.17% 2 0.59% 3 0.42% 4 0.11% 5 3.29%

 2008-4 1.50% 2 0.22% 3 0.87% 4 0.57% 5 3.16%

 2012-4-0.07% 5 1.18% 2-1.17% 3-0.35% 4-0.41%

 2016-4 0.70% 3 0.14% 4 0.65% 5 0.29% 2 1.78%

 Avg0.46% 0.42% 1.74%-0.21% 2.41%

OTC summary for PY4 1964 - 2016

Averages 0.12% 0.12% 0.65% 0.19% 1.08%

% Winners 57% 71% 57% 79% 64%

MDD5/26/20002.00% --5/29/19961.78% --5/31/20121.52%

OTC summary for all years 1963 - 2019

Averages 0.10% 0.04% 0.26% 0.18% 0.58%

% Winners 54% 60% 60% 63% 61%

MDD 5/30/20018.65% --5/27/19703.17% --5/25/19992.97%

SPX PY4

               Day4 Day3 Day2 Day1 Totals

 1928-4 0.15% 5-1.66% 1 1.28% 2 0.91% 4 0.68%

 1932-4 1.59% 4-5.48% 5 0.41% 6-7.84% 2 -11.31%

 1936-4 1.40% 2-0.21% 3-0.83% 4 0.70% 5 1.06%

 1940-4 1.41% 1-2.03% 2 0.65% 3 0.22% 5 0.25%

 1944-4 0.16% 5 0.25% 6 0.16% 1 0.65% 3 1.22%

 1948-4-0.06% 2 0.91% 3 0.00% 4 0.06% 5 0.91%

 1952-4 0.21% 1-0.25% 2-0.17% 3 0.08% 4-0.12%

 1956-4 0.04% 5-1.17% 1 2.29% 2 0.20% 4 1.37%

 Avg0.35%-0.46% 0.59% 0.24% 0.72%

 1960-4-0.05% 3 0.07% 4 0.05% 5 0.16% 2 0.23%

 1964-4-0.21% 1-0.21% 2-0.16% 3 0.14% 4-0.45%

 1968-4-0.16% 1 0.65% 2 0.31% 3 0.78% 5 1.57%

 1972-4 0.14% 4 0.18% 5-0.28% 2-0.74% 3-0.71%

 1976-4 0.05% 2-0.15% 3 0.04% 4 0.80% 5 0.74%

 Avg -0.05% 0.11%-0.01% 0.23% 0.28%

 1980-4 0.71% 2 0.59% 3-1.60% 4 0.88% 5 0.58%

 1984-4 0.26% 5-0.88% 2 0.04% 3 0.13% 4-0.45%

 1988-4 0.10% 3 0.34% 4-0.48% 5 3.45% 2 3.42%

 1992-4-0.63% 2 0.18% 3 1.11% 4-0.33% 5 0.33%

 1996-4-0.93% 2-0.64% 3 0.57% 4-0.38% 5-1.38%

 Avg -0.10%-0.08%-0.07% 0.75% 0.50%

 2000-4-1.26% 4-0.25% 5 3.23% 2-0.13% 3 1.58%

 2004-4 1.61% 2 0.17% 3 0.57% 4-0.05% 5 2.30%

 2008-4 0.68% 2 0.40% 3 0.53% 4 0.15% 5 1.77%

 2012-4-0.22% 5 1.11% 2-1.43% 3-0.23% 4-0.77%

 2016-4 0.70% 3-0.02% 4 0.43% 5-0.10% 2 1.01%

 Avg0.30% 0.28% 0.67%-0.07% 1.18%

SPX summary for PY$ 1928 - 2016

Averages 0.25%-0.35% 0.29%-0.02% 0.17%

% Winners 65% 48% 65% 65% 70%

MDD5/31/193212.52% --5/28/19402.03% --5/28/19281.66%

SPX summary for all years 1928 - 2019

Averages 0.08%-0.06% 0.23% 0.00% 0.26%

% Winners 57% 48% 62% 55% 61%

MDD 5/31/193212.52% --5/28/19628.45% --5/31/19354.49%

Conclusion

New lows which had been building quickly disappeared on Monday. The last few days of May and first few days of June have historically been strong.

The strongest sectors last week were Transportation and Retail (imagine that); the weakest were Biotech and Utilities.

I expect the major averages to be higher on Friday, May 29, than they were on Friday, May 22.

Last week's negative forecast was a miss