Technical Market Report For May 4

The good news is the Russell 2000 had another good week.

The Negatives

The strongest sectors last week were Banks and Energy. Both are on life support.

The Positives

The number of new lows is insignificant.

The first chart covers the past six months showing the S&P 500 (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 vertical lines have been drawn on the first trading day of each month. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio broke 80% for a day before finishing the week at a positive 69%.

The next chart is similar to the first one except it shows the NASDAQ composite (OTC) in blue and OTC HL Ratio, in red has been calculated with NASDAQ data.

OTC HL Ratio also broke 80% before finishing the week at 69%.

Both of these charts look strong, but the numbers used to calculate them are all very small.

Seasonality

Next week includes the five trading days prior to the second Friday 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 1953 to 2019. There are summaries for both the fourth year of the Presidential Cycle and all years combined. Prior to 1953 the market traded six days a week so that data has been ignored. 

Returns for the coming week have, on average, been negative by all measures.

Report for the week before the second Friday of May.

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

Daily returns from Monday to second Friday.

OTC Presidential Year 4 (PY4)

 Year Mon Tue Wed Thur Fri Totals

 1964-4 0.85%-0.36% 0.59% 0.25% 0.18% 1.51%

 1968-4 0.09% 0.18% 0.53% 0.26%-0.56% 0.51%

 1972-4-0.63%-2.21% 0.79% 0.93% 1.16% 0.05%

 1976-4 0.59% 0.04% 0.06%-0.46%-0.49%-0.26%

 1980-4 0.56% 0.84% 0.95%-0.22%-0.14% 1.99%

 1984-4 0.18% 0.43% 0.07% 0.12%-0.93%-0.12%

 1988-4-0.83%-0.22%-1.65% 0.27% 0.61%-1.83%

 1992-4 0.93% 0.78% 0.22%-0.37%-0.24% 1.32%

 1996-4 0.14%-0.30% 0.06% 0.37% 1.26% 1.53%

 Avg0.20% 0.30%-0.07% 0.03% 0.11% 0.58%

 2000-4-3.86%-2.30%-5.59% 3.39% 0.84%-7.51%

 2004-4-1.14% 1.86%-0.30% 0.02%-1.13%-0.69%

 2008-4-0.52% 0.78%-1.80% 0.52%-0.23%-1.26%

 2012-4 0.05%-0.39%-0.39%-0.04% 0.01%-0.76%

 2016-4 0.30% 1.26%-1.02%-0.49%-0.41%-0.38%

 Avg -1.04% 0.24%-1.82% 0.68%-0.19%-2.12%

OTC summary for PY4 1964 - 2016 

 Avg -0.23% 0.03%-0.54% 0.33% 0.00%-0.42%

 Win% 64% 57% 57% 64% 43% 43%

OTC summary for all years 1963 - 2019

 Avg 0.07%-0.14%-0.03%-0.08% 0.07%-0.10%

 Win% 58% 51% 51% 54% 60% 53%

SPX PY4

 Year Mon Tue Wed Thur Fri Totals

 1956-4-0.60%-0.41%-0.17%-1.63%-0.08%-2.89%

 1960-4 0.09%-0.69% 0.28% 0.51% 0.82% 1.01%

 1964-4 0.37% 0.51% 0.22% 0.11%-0.18% 1.03%

 1968-4-0.31% 0.56% 0.01%-0.53% 0.11%-0.16%

 1972-4-0.46%-1.32% 0.65% 0.33% 0.58%-0.22%

 1976-4 1.20%-0.15%-0.17%-0.59%-0.80%-0.52%

 Avg0.18%-0.22% 0.20%-0.03% 0.10% 0.23%

 1980-4 0.76%-0.12% 0.88%-0.98%-1.33%-0.80%

 1984-4 0.23% 0.66%-0.26%-0.07%-0.94%-0.38%

 1988-4-0.37% 0.42%-1.67% 0.21% 1.15%-0.25%

 1992-4 1.06%-0.02%-0.01%-0.23% 0.05% 0.86%

 1996-4-0.13%-0.40% 1.02% 0.10% 1.03% 1.63%

 Avg0.31% 0.11%-0.01%-0.19%-0.01% 0.21%

 2000-4-0.59%-0.85%-2.05% 1.79% 0.94%-0.77%

 2004-4-1.05% 0.77% 0.17%-0.08%-0.07%-0.26%

 2008-4-0.45% 0.77%-1.81% 0.37%-0.67%-1.81%

 2012-4 0.04%-0.43%-0.67% 0.25%-0.34%-1.15%

 2016-4 0.08% 1.25%-0.96%-0.02%-0.85%-0.50%

 Avg -0.40% 0.30%-1.06% 0.46%-0.20%-0.90%

SPX summary for PY4 1956 - 2016 

 Avg -0.01% 0.03%-0.28%-0.03%-0.04%-0.32%

 Win% 50% 44% 44% 50% 44% 25%

SPX summary for all years 1953 - 2019

 Avg0.01%-0.03%-0.01%-0.12% 0.04%-0.11%

 Win% 47% 45% 52% 46% 55% 42%

Conclusion

Seasonally next week has been overwhelmingly negative. There has not been an up week since 1996. The strongest sectors last week were Banks and Energy (the usual laggards); the weakest were Biotech and Utilities.

I expect the major averages to be lower on Friday, May 8, than they were on Friday, May 1.

Last week was similar to the previous week; the blue chip averages were down while the Russell 2000 was up. I am calling last weeks positive forecast a tie.