The good news is:
NYSE new lows declined last week.
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. Declining new highs imply narrowing leadership.
NY NH rose last week, but would be far from any new high should it occur.
The next chart is similar to the first one except it shows the Nasdaq composite (OTC) in blue and OTC NH in green has been calculated with Nasdaq data.
OTC NH is near its lowest level in over a year.
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, 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).
NY HL Ratio improved last week, but remained in negative territory.
The next chart is similar to the one above except it was calculated with Nasdaq data. The OTC is shown in blue while OTC HL Ratio is shown in red.
OTC HL Ratio to its lowest level in more than a year.
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 continued to move modestly upward last week.
The next chart is similar to the chart above except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.
OTC NL fell to its lowest level in more than a year.
The Positives
The breadth indicators are mixed, slowly improving on the NYSE while deteriorating on the Nasdaq. Seasonality next week has been positive.
Seasonality
Next week includes the 5 trading days prior to the 4th Friday of October 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 1953 to 2025. 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.
Seasonality for the coming week has been stronger during the 2nd year of the Presidential Cycle than other years.
Report for the week before the 4th Friday of October.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.
OTC Presidential Year 2 (PY2)
Year Mon Tue Wed Thur Fri Totals
1966-2 -0.33% 0.27% 0.45% 0.82% 1.33% 2.53%
Avg -0.33% 0.27% 0.45% 0.82% 1.33% 2.53%
1970-2 -0.20% -1.41% 0.41% -0.42% -0.48% -2.10%
1974-2 1.71% 0.50% -1.15% -1.26% 0.45% 0.24%
1978-2 -1.52% -0.66% 0.02% -2.61% -2.33% -7.10%
1982-2 1.05% 0.42% 1.55% 1.70% -0.13% 4.59%
1986-2 -0.62% -0.12% 0.23% 0.64% 0.13% 0.27%
Avg 0.08% -0.25% 0.21% -0.39% -0.47% -0.82%
1990-2 1.11% -0.01% -0.03% -0.36% -1.58% -0.87%
1994-2 -0.54% -0.39% - 0.66% 0.55% 1.13% 1.41%
1998-2 1.71% -0.58% 2.17% 1.66% -0.51% 4.45%
2002-2 1.69% -1.29% 2.12% -1.63% 2.50% 3.39%
2006-2 0.57% -0.46% 0.50% 0.96% -1.20% 0.37%
Avg 0.91% -0.54% 1.08% 0.24% 0.07% 1.75%
2010-2 0.48% -1.76% 0.84% 0.09% 0.80% 0.45%
2014-2 1.35% 2.40% -0.83% 1.60% 0.69% 5.21%
2018-2 0.26% -0.42% -4.42% 2.95% -2.06% -3.69%
2022-2 0.86% 2.25% -2.04% -1.63% 2.87% 2.31%
OTC summary for PY2 1966 - 2022
Avg 0.51% -0.08% 0.03% 0.20% 0.11% 0.77%
Win% 67% 33% 67% 60% 53% 73%
OTC summary for all years 1963 - 2025
Avg 0.13% -0.34% -0.12% 0.03% 0.03% -0.26%
Win% 57% 41% 47% 54% 57% 52%
Year 2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.38% 0.25% 0.81% -0.12% 0.00% 1.32%
1958-2 -0.37% 0.00% -0.39% -0.20% -0.31% -1.27%
1962-2 -1.13% -2.67% 3.22% -0.94% -0.27% -1.81%
1966-2 0.29% 0.61% 0.86% 0.82% 0.01% 2.60%
1970-2 -1.34% 0.59% 0.02% -0.33% 0.47% -0.59%
1974-2 1.69% -0.50% -2.87% -1.14% -0.14% -2.97%
1978-2 0.23% -0.70% -0.18% -1.32% -1.50% -3.47%
1982-2 2.37% -0.11% 1.94% -0.12% -0.14% 3.94%
Avg 0.65% -0.02% -0.05% -0.42% -0.26% -0.10%
1986-2 -1.20% -0.04% 0.16% 1.28% -0.43% -0.23%
1990-2 0.73% -0.76% 0.08% -0.78% -1.76% -2.49%
1994-2 -0.87% 0.15% 0.24% 0.70% 1.70% 1.91%
1998-2 0.57% 0.14% 0.56% 0.80% -0.72% 1.35%
2002-2 1.73% -1.06% 0.67% -1.52% 1.72% 1.54%
Avg 0.19% -0.31% 0.34% 0.10% 0.10% 0.42%
2006-2 0.62% 0.03% 0.35% 0.50% -0.85% 0.64%
2010-2 0.72% -1.59% 1.05% 0.18% 0.24% 0.61%
2014-2 0.91% 1.96% -0.73% 1.23% 0.71% 4.08%
2018-2 -0.43% -0.55% -3.09% 1.86% -1.73% -3.94%
2022-2 1.19% 1.63% -0.74% -0.61% 2.46% 3.93%
Avg 0.60% 0.29% -0.63% 0.63% 0.17% 1.06%
SPX summary for PY2 1954 - 2022
Avg 0.34% -0.16% 0.11% 0.02% -0.03% 0.29%
Win% 67% 47% 67% 44% 41% 56%
SPX summary for all years 1953 - 2025
Avg -0.09% -0.05% 0.05% -0.08% 0.01% -0.17%
Win% 58% 46% 51% 45% 49% 48%
Conclusion
The small caps and big tech have been weak while the rest of the market has been doing okay. Seasonality for the coming week has been pretty good.
The strongest sectors last week were Energy (for the 2nd week in a row) and Utilities (for the 3rd week in a row) while the weakest were Electronics (for the 2nd week in a row) and Telecomm.
I expect the major averages to be higher on Friday October 23 than they were on Friday October 16.
Last week the Dow Jones Industrial Average was up while the other major indices were down, so I am calling last week’s positive forecast a tie.
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