Technical Market Report For Saturday, Dec. 11

Technical Market Report for Saturday, Dec. 11, 2021

The good news is that the S&P 500 (SPX) closed at an all-time high last Friday.

The Negatives

There was a sharp decline in the number of new lows last week from Monday through Wednesday. However, they returned to dangerous levels on Friday.

The first chart covers the past six months, showing the Nasdaq composite (OTC) in blue, and a 40% trend (four-day EMA) of Nasdaq new highs divided by new highs + new lows (OTC HL Ratio) in red. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level.

The OTC HL Ratio was at its lowest level since the COVID-19 crash, and then it somewhat recovered. Yet, it was unable to reach a positive level.

The next chart is similar to the previous one, except it shows the SPX in red and the NY HL Ratio in blue. The NY HL Ratio information has been calculated with NYSE data. The NY HL Ratio also recovered from its lowest level since the COVID-19 crash, but it then fell to a slightly negative level on Friday. 

The next chart covers the past six months, showing the SPX in red and a 10% trend (19-day EMA) of NYSE new highs (NY NH) in green. The NY NH continued falling as the SPX hit its all-time high.

The next chart is similar to the one above, except it shows the OTC in blue and the OTC NH in green. The OTC NH information has been calculated with Nasdaq data. Like the chart above, last week's rally was unable to turn the OTC NH upward.

The Positives

New lows disappeared momentarily last week, reaching comfortable levels on Tuesday and Wednesday, but they then returned to uncomfortable levels on Friday. The trend of the new low indicators is still going.

The next chart covers the past six months, showing the OTC in blue, and a 10% trend (19-day EMA) of Nasdaq new lows (OTC NL) in brown. The OTC NL has been plotted on an inverted Y axis, so decreasing numbers of new lows move the indicator upward (up is good). The OTC NL turned sharply upward last week from its extreme level of the week before.

The next chart is similar to the one above, except is shows the SPX in red and the NY NL in blue. The NY NL information has been calculated with NYSE data. Similar action was seen in the NY NL

Seasonality

Next week includes the five trading days prior to the third Friday of December during the first 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 2020, while SPX data runs from 1953 to 2020. There are summaries for both the first 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.

Average returns for the coming week have been modestly positive by all measures. The number following the year is the position in the Presidential Cycle.

OTC Presidential Year 1 (PY1)

   Year       Mon       Tue      Wed      Thur      Fri      Totals

 1965-1   0.81%   0.12%   0.27%   0.14%  -0.07%   1.27%

 1969-1   0.04%   0.14%  -0.54%  -0.66%   1.28%   0.26%

 1973-1  -0.56%   1.60%  -0.35%   0.03%  -0.83%  -0.10%

 1977-1   0.31%   0.20%  -0.13%  -0.07%   0.15%   0.46%

 1981-1  -1.50%  -0.26%  -0.04%   0.31%   0.67%  -0.81%

 1985-1   0.36%  -0.59%  -0.24%   0.06%   0.14%  -0.27%

 1989-1  -0.83%  -0.44%   0.16%  -0.81%  -0.81%  -2.74%

 1993-1  -0.13%  -1.09%   0.20%   0.34%   0.49%  -0.19%

 1997-1   0.00%   1.07%  -0.36%  -1.56%   0.10%  -0.76%

   Avg:    -0.53%  -0.26%  -0.06%  -0.33%   0.12%  -0.95%

 2001-1   1.76%   0.87%  -1.09%  -3.25%   1.42%  -0.29%

 2005-1   0.19%   0.18%  -0.11%  -0.09%  -0.36%  -0.19%

 2009-1   0.99%  -0.50%   0.27%  -1.22%   1.45%   1.00%

 2013-1   0.71%  -0.14%   1.15%  -0.29%   1.15%   2.58%

 2017-1   0.51%  -0.18%   0.20%  -0.28%   1.16%   1.40%

   Avg:      0.83%   0.04%   0.08%  -1.02%   0.96%   0.90%

OTC Summary for PY1 1965 - 2017 

• Avg:     0.20%   0.07%  -0.04%  -0.52%   0.42%   0.12%
• Win%:      69%     50%     43%     36%     71%     43%

OTC Summary for All Years 1963 - 2020

• Avg:    -0.03%   0.13%  -0.03%   0.00%   0.13%   0.20%
• Win%:      52%     53%     51%     59%     59%     60%

SPX PY1

   Year       Mon       Tue       Wed      Thur      Fri      Totals

 1953-1  -0.28%   0.08%   1.01%  -0.08%   0.20%   0.93%

 1957-1  -1.50%  -1.74%  -0.10%   1.07%  -0.80%  -3.08%

 1961-1   0.49%   0.35%  -0.15%  -0.76%   0.04%  -0.04%

 1965-1   0.03%   0.05%   0.15%   0.11%  -0.04%   0.30%

 1969-1  -0.30%  -0.91%  -0.58%   1.58%   0.85%   0.65%

 1973-1  -0.58%   2.15%   0.08%  -0.28%  -1.07%   0.30%

 1977-1  -0.02%  -0.07%   0.50%  -0.51%  -0.16%  -0.26%

   Avg:    -0.08%   0.31%   0.00%   0.03%  -0.08%   0.19%

 1981-1  -1.72%   0.17%  -0.46%   0.57%   0.71%  -0.73%

 1985-1   0.99%  -0.65%  -0.40%   0.10%   0.44%   0.48%

 1989-1  -0.04%   0.91%   0.29%  -0.52%  -0.23%   0.42%

 1993-1   0.38%  -0.57%  -0.26%   0.32%   0.66%   0.53%

 1997-1   1.05%   0.48%  -0.26%  -1.06%  -0.89%  -0.68%

   Avg:     0.13%   0.07%  -0.22%  -0.12%   0.14%   0.01%

 2001-1   1.00%   0.75%   0.58%  -0.84%   0.44%   1.94%

 2005-1   0.08%   0.56%   0.42%  -0.14%  -0.28%   0.63%

 2009-1   0.70%  -0.55%   0.11%  -1.18%   0.58%  -0.34%

 2013-1   0.63%  -0.31%   1.66%  -0.06%   0.48%   2.41%

 2017-1   0.32%   0.15%  -0.05%  -0.41%   0.90%   0.92%

   Avg:      0.55%   0.12%   0.55%  -0.53%   0.42%   1.11%

SPX Summary for PY1 1953 - 2017 

• Avg:     0.07%   0.05%   0.15%  -0.12%   0.11%   0.26%
• Win%:      59%     59%     53%     35%     59%     65%

SPX Summary for All Years 1953 - 2020

• Avg:     0.02%   0.19%   0.05%  -0.02%   0.12%   0.36%
• Win%:      55%     54%     51%     49%     59%     62%

Conclusion

Last week saw new lows recover from their extreme levels of the week before. The SPX all-time high being unconfirmed by anything leads me to think it is just a cycle top being dragged out a little longer.

The strongest sectors last week were utilities (same as the past two weeks) and telecomm, while the weakest were internet and precious metals. I expect the major averages to be lower on Friday, Dec. 17 than they were on Friday, Dec. 10. Last week's negative forecast was a miss.