The good news is:
New 52 week lows disappeared on Friday falling from 394 on Thursday to 134 on Friday on the NYSE and from 528 on Thursday to 292 Friday on the Nasdaq.
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 finished the week at its lowest level in over a year.
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 continued its fall, although, it has been relatively stronger than the NYSE: could be all the fixed income funds on the NYSE.
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 also finished the week just off its lowest level in over a year.
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 rose slightly from near its lowest low of the past year. This indicator is still in deeply negative territory.
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 finished the week with a slight blip upward from its lowest level in over a year. The value of the indicator is 261 so any number of daily new lows will move the indicator upward.
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 resumed its decline, but moved slightly upward on Friday. The value of the indicator is 350, so any number less than 350 will move the indicator upward.
The Positives
The positives are not yet visible in the charts. Friday was pivotal. New lows declined sharply on both the NYSE and NASDAQ.
Seasonality
Next week includes the 5 trading days prior to the 2nd 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 positive by all measures.
Report for the week before the 2nd Friday of October.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.
OTC Presidential Year 2 (PY2)
Year Mon Tue Wed Thur Fri Totals
1966-2 -1.42% 1.32% 0.22% 2.35% 0.32% 2.79%
1970-2 1.56% 0.69% 0.30% 0.21% -0.13% 2.63%
1974-2 2.56% -0.78% 2.57% 2.71% 2.18% 9.24%
1978-2 0.48% 0.22% 0.25% 0.22% 0.01% 1.17%
1982-2 -0.36% 0.40% 1.70% 1.88% 1.69% 5.31%
Avg 0.56% 0.37% 1.01% 1.47% 0.81% 4.23%
1986-2 0.13% -0.23% 0.15% 0.05% 0.13% 0.22%
1990-2 0.22% -2.59% -1.73% -2.29% 0.60% -5.79%
1994-2 0.91% 1.16% 0.19% 0.12% -0.11% 2.27%
1998-2 -4.85% -1.68% -3.20% -2.97% 5.17% -7.53%
2002-2 -1.80% 0.88% -1.34% 4.42% 4.05% 6.21%
Avg -1.08% -0.49% - 1.19% -0.14% 1.97% -0.92%
2006-2 0.51% 0.16% -0.31% 1.64% 0.47% 2.48%
2010-2 -1.11% 2.36% -0.80% 0.13% 0.77% 1.35%
2014-2 -0.47% -1.56% 1.90% -2.02% -2.33% -4.48%
2018-2 -0.67% 0.03% -4.08% -1.25% 2.29% -3.69%
2022-2 -1.04% -1.10% -0.09% 2.23% -3.08% -3.07%
Avg -0.55% -0.02% -0.68% 0.15% -0.38% -1.48%
OTC summary for PY2 1966 - 2022
Avg -0.36% -0.05% -0.28% 0.49% 0.80% 0.61%
Win% 47% 60% 53% 73% 73% 67%
OTC summary for all years 1963 - 2025
Avg -0.05% -0.35% -0.02% 0.20% 0.37% 0.16%
Win% 56% 46% 53% 65% 68% 56%
SPX PY2
Year Mon Tue Wed Thur Fri Totals
1954-2 0.56% 0.49% 0.40% -0.21% -0.06% 1.17%
1958-2 0.62% 0.57% 0.18% -0.02% 0.67% 2.01%
1962-2 0.00% 0.23% 0.07% -0.33% -0.18% -0.21%
1966-2 1.82% 0.51% 2.84% -0.19% -0.38% 4.60%
1970-2 1.54% 0.44% 0.05% -1.08% -1.01% -0.07%
1974-2 4.19% -0.17% 4.60% 2.90% 1.93% 13.45%
1978-2 1.03% -0.12% 0.89% -0.48% -0.21% 1.11%
1982-2 -0.38% 0.39% 3.27% 2.25% 1.75% 7.27%
Avg 1.64% 0.21% 2.33% 0.68% 0.42% 5.27%
1986-2 0.46% -0.16% 0.97% -0.35% -0.16% 0.76%
1990-2 0.64% -2.67% -1.54% -1.64% 1.55% -3.68%
1994-2 0.87% 1.47% -0.07% 0.50% 0.28% 3.05%
1998-2 -1.40% -0.40% -1.41% -1.16% 2.59% -1.78%
2002-2 -1.91% 1.69% -2.73% 3.50% 3.91% 4.45%
Avg -0.27% -0.01% -0.96% 0.17% 1.63% 0.56%
2006-2 0.08% 0.20% -0.26% 0.95% 0.20% 1.19%
2010-2 -0.80% 2.09% -0.07% -0.16% 0.61% 1.66%
2014-2 -0.16% -1.51% 1.75% -2.07% -1.15% -3.13%
2018-2 -0.04% -0.14% -3.29% -2.06% 1.42% -4.10%
2022-2 -0.75% -0.65% -0.33% 2.60% -2.37% -1.50%
Avg -0.33% 0.00% -0.44% -0.15% -0.25% -1.18%
SPX summary for PY2 1954 - 2022
Avg 0.37% 0.12% 0.30% 0.16% 0.52% 1.46%
Win% 59% 56% 56% 33% 56% 61%
SPX summary for all years 1953 - 2025
Avg 0.09% -0.27% 0.14% -0.05% 0.11% 0.03%
Win% 53% 36% 53% 44% 56% 58%
Conclusion
New lows declined significantly on Friday.
It does not show up very well on the charts because it happened only on the last day of the week.
This is likely to be the start of a bull run that could last several weeks.
If the number of new lows does not diminish quickly next week; my optimism was pre mature.
The strongest sectors last week were Electronics (for the 4th week) and Utilities (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 October 9 than they were on Friday October 2.
Last week the OTC was up while the other major indices were down, so I am calling last week’s negative forecast a tie.
Comments
Log in or sign up to join the conversation.