The good news is:
The major indices along with most of the breadth indicators turned positive last Wednesday.
The Negatives
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 continued to decline while the SPX rose last week..
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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 also fell, however the fall was arrested on Friday.
The Positives
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).
NY NL turned upward toward the end of last week.
The next chart is similar to the one above except it shows the OTC in blue and OTC NL, in brown, has been calculated with NASDAQ data.
OTC NL turned upward along with prices during the last half of the week.
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, on the Y axis, at 10% levels for the indicator; the line is solid at the 50%, neutral level (equal numbers of new highs and new lows).
OTC HL Ratio turned sharply upward, finishing the week in positive territory.
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 turned positive after dipping briefly into negative territory.
Seasonality
Next week includes the last 4 trading days of May 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 2025 while SPX data runs from 1928 to 2025. There are summaries for both the 2nd year of the Presidential Cycle and all years combined.
Seasonality for the coming week has 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.
OTC Presidential Year 2 (PY2)
Day4 Day3 Day2 Day1 Totals
1966-2 1.04% 3 0.96% 4 0.80% 5 0.76% 2 3.55%
1970-2 -2.28% 2 -0.90% 3 5.00% 4 2.09% 5 3.90%
1974-2 -0.48% 2 -1.58% 3 0.39% 4 0.14% 5 -1.53%
1978-2 0.02% 4 0.03% 5 0.12% 2 0.20% 3 0.37%
1982-2 -0.32% 2 -1.29% 3 -0.23% 4 0.10% 5 -1.75%
Avg -0.41% -0.56% 1.21% 0.66% 0.91%
1986-2 0.76% 2 0.57% 3 0.20% 4 0.55% 5 2.09%
1990-2 -1.00% 5 0.84% 2 0.28% 3 0.04% 4 0.16%
1994-2 0.18% 3 -0.16% 4 0.21% 5 0.28% 2 0.51%
1998-2 -1.49% 2 0.18% 3 0.75% 4 -0.87% 5 -1.44%
2002-2 -0.56% 2 -1.68% 3 0.46% 4 -0.99% 5 -2.77%
Avg -0.42% -0.05% 0.38% -0.20% -0.29%
2006-2 1.34% 4 0.55% 5 -2.06% 2 0.65% 3 0.48%
2010-2 -0.12% 2 -0.68% 3 3.73% 4 -0.91% 5 2.02%
2014-2 1.22% 2 -0.28% 3 0.54% 4 -0.13% 5 1.36%
2018-2 0.13% 5 -0.50% 2 0.89% 3 -0.27% 4 0.24%
2022-2 1.51% 3 2.68% 4 3.33% 5 -0.41% 2 7.10%
Avg 0.82% 0.35% 1.28% -0.21% 2.24%
OTC summary for PY2 1966 - 2022
Averages 0.00% -0.08% 0.96% 0.08% 0.95%
% Winners 53% 47% 87% 60% 73%
MDD 5/27/1970 3.17% -- 5/31/2002 2.75% -- 5/30/2006 2.06%
OTC summary for all years 1963 - 2025
Averages 0.19% 0.11% 0.28% 0.17% 0.75%
% Winners 57% 60% 59% 60% 63%
MDD 5/30/2001 8.65% -- 5/27/1970 3.17% -- 5/25/1999 2.97%
SPX PY2
Day4 Day3 Day2 Day1 Totals
1930-2 0.17% 1 0.04% 2 0.58% 3 0.45% 4 1.24%
1934-2 0.52% 6 0.82% 1 -0.41% 2 -1.84% 4 -0.91%
1938-2 -2.62% 4 -0.11% 5 1.29% 6 -1.38% 2 -2.82%
1942-2 0.25% 2 2.00% 3 0.25% 4 -0.37% 5 2.13%
1946-2 0.75% 1 1.48% 2 0.26% 3 -0.36% 5 2.12%
1950-2 -0.11% 5 -0.11% 6 0.38% 1 0.32% 3 0.48%
1954-2 -0.24% 2 0.83% 3 -0.41% 4 0.48% 5 0.66%
1958-2 -0.05% 1 -0.14% 2 0.14% 3 0.55% 4 0.50%
1962-2 -1.90% 5 -6.68% 1 4.65% 2 2.67% 4 -1.26%
Avg -0.31% -0.92% 1.00% 0.73% 0.50%
1966-2 0.35% 3 0.00% 4 0.30% 5 -1.37% 2 -0.73%
1970-2 -1.37% 2 5.02% 3 2.53% 4 2.60% 5 8.78%
1974-2 -0.24% 2 -1.67% 3 0.62% 4 -0.17% 5 -1.46%
1978-2 -0.29% 4 -0.23% 5 0.29% 2 0.44% 3 0.22%
1982-2 -0.34% 2 -1.13% 3 -0.40% 4 -0.69% 5 -2.56%
Avg -0.38% 0.40% 0.67% 0.16% 0.85%
1986-2 1.41% 2 0.77% 3 0.55% 4 -0.25% 5 2.47%
1990-2 -1.07% 5 1.71% 2 0.06% 3 0.10% 4 0.80%
1994-2 0.34% 3 0.16% 4 0.06% 5 -0.18% 2 0.37%
1998-2 -1.49% 2 -0.16% 3 0.49% 4 -0.62% 5 -1.78%
2002-2 -0.86% 2 -0.64% 3 -0.28% 4 0.23% 5 -1.54%
Avg -0.33% 0.37% 0.18% -0.14% 0.07%
2006-2 1.14% 4 0.57% 5 -1.59% 2 0.81% 3 0.94%
2010-2 0.04% 2 -0.57% 3 3.29% 4 -1.24% 5 1.52%
2014-2 0.60% 2 -0.11% 3 0.54% 4 0.18% 5 1.21%
2018-2 -0.24% 5 -1.16% 2 1.27% 3 -0.69% 4 -0.81%
2022-2 0.95% 3 1.99% 4 2.47% 5 -0.63% 2 4.78%
Avg 0.50% 0.15% 1.20% -0.31% 1.53%
SPX Summary for PY2 1930 - 2022
Averages -0.18% 0.11% 0.70% -0.04% 0.60%
% Winners 46% 46% 79% 46% 63%
MDD 5/28/1962 8.45% -- 5/31/1938 2.83% -- 5/28/1982 2.54%
SPX summary for all years 1928 - 2025
Averages 0.13% -0.02% 0.24% 0.00% 0.35%
% Winners 58% 49% 62% 55% 62%
MDD 5/31/1932 12.52% -- 5/28/1962 8.45% -- 5/31/1935 4.49%
Conclusion
The market turned positive last Wednesday. All of the major indices and most of the breadth indicators turned positive. Seasonality for next week has been positive.
The strongest sectors last week were Banks and Utilities (both up from the bottom last week) while the weakest were Basic Materials and Precious Metals.
I expect the major averages to be higher on Friday May 29 than they were Friday May 22.
Last week's negative forecast was a miss.
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