Technical Market Report For Saturday, May 7

The good news is:

In a couple weeks Seasonality goes positive for a few days.

The Negatives

Not much has changed since last week.

In addition to the on going bear market, Seasonality for the coming week is modestly negative.

* * *

The first chart covers the past 6 months showing the Nasdaq composite (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 vertical lines have been drawn on the 1st 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 (equal numbers of new highs and new lows).

OTC HL Ratio has remained in negative territory for 5 months.

The next chart is similar to the previous one except it shows the S&P 500 (SPX) in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL Ratio remains in deeply in 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 hit a new low on Friday confirming the new index cyclical low.

The next chart is similar to the previous one except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.

OTC NL fell sharply, but is not confirming the new index low. This would be a positive if the numbers were not so large.

The Positives

The market got some relief early last week which, unfortunately, sets it up for another down week.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday 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 2021 while SPX data runs from 1953 to 2021. 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.

Average returns for the coming week have been modestly negative by all measures.

Report for the week before the 2nd Friday of May.

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  -0.56%  -1.30%   0.12%   0.07%  -0.86%  -2.53%

 1970-2   0.05%  -2.37%   0.26%   0.01%   1.27%  -0.78%

 1974-2  -0.18%  -0.74%  -1.06%   0.08%  -1.76%  -3.67%

 1978-2  -0.11%  -0.08%   0.43%   0.60%   0.97%   1.81%


 1982-2  -0.30%  -0.74%   1.00%  -0.21%   0.30%   0.06%

 1986-2   0.74%   0.07%  -0.25%   0.54%   0.44%   1.54%

 1990-2   0.61%   0.14%  -0.12%   0.43%   1.13%   2.20%

 1994-2  -1.35%   0.28%  -1.10%   0.36%  -0.37%  -2.18%

 1998-2   0.20%  -0.66%  -0.44%  -1.16%   1.60%  -0.46%


 Avg     -0.02%  -0.18%  -0.18%  -0.01%   0.62%   0.23%


 2002-2  -2.14%  -0.30%   7.78%  -2.70%  -3.01%  -0.36%

 2006-2   0.10%  -0.29%  -0.75%  -2.07%  -1.27%  -4.28%

 2010-2   4.81%   0.03%   2.09%  -1.26%  -1.98%   3.68%

 2014-2   0.34%  -1.38%  -0.32%  -0.40%   0.50%  -1.26%

 2018-2   0.77%   0.02%   1.00%   0.89%  -0.03%   2.66%


 Avg      0.78%  -0.38%   1.96%  -1.11%  -1.16%   0.09%


OTC summary for PY2 1966 - 2018 

 Avg      0.21%  -0.52%   0.62%  -0.35%  -0.22%  -0.25%

 Win%       57%     36%     50%     57%     50%     43%


OTC summary for all years 1963 - 2021

 Avg      0.05%  -0.12%  -0.06%  -0.04%   0.14%  -0.03%

 Win%       58%     51%     51%     56%     61%     53%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2  -0.10%  -0.45%   0.81%  -0.56%   0.84%   0.53%

 1958-2   0.23%   0.50%  -0.18%   0.14%   0.02%   0.71%


 1962-2  -0.33%  -1.29%  -1.40%  -1.07%  -1.45%  -5.54%

 1966-2  -1.73%   0.88%   0.17%  -1.15%  -0.88%  -2.71%

 1970-2  -2.54%  -0.97%   1.11%   0.45%  -0.49%  -2.44%

 1974-2  -0.19%   0.37%   0.20%   1.44%  -1.60%   0.22%

 1978-2  -0.35%  -0.30%   0.02%   1.33%   0.90%   1.60%


 Avg     -1.03%  -0.26%   0.02%   0.20%  -0.70%  -1.77%


 1982-2  -0.91%   0.88%  -0.21%  -0.80%  -0.18%  -1.22%

 1986-2   1.25%  -0.21%  -0.49%   0.44%   0.30%   1.31%

 1990-2   0.63%   0.43%   0.25%   0.28%   2.38%   3.97%

 1994-2  -1.23%   0.83%  -1.01%   0.51%   0.09%  -0.81%

 1998-2   0.10%  -0.58%  -0.96%  -0.89%   1.19%  -1.14%


 Avg     -0.03%   0.27%  -0.48%  -0.09%   0.76%   0.42%


 2002-2  -1.93%  -0.30%   3.75%  -1.45%  -1.68%  -1.62%

 2006-2  -0.08%   0.04%  -0.17%  -1.28%  -1.12%  -2.62%

 2010-2   4.40%  -0.34%   1.37%  -1.21%  -1.88%   2.34%

 2014-2   0.19%  -0.90%   0.56%  -0.14%   0.15%  -0.14%

 2018-2   0.35%  -0.03%   0.97%   0.94%   0.17%   2.40%


 Avg      0.58%  -0.31%   1.30%  -0.63%  -0.87%   0.07%


SPX summary for PY2 1954 - 2018

 Avg     -0.13%  -0.08%   0.28%  -0.18%  -0.19%  -0.30%

 Win%       41%     41%     59%     47%     53%     47%


SPX summary for all years 1953 - 2021

 Avg      0.00%  -0.03%  -0.05%  -0.08%   0.09%  -0.07%

 Win%       47%     45%     51%     48%     56%     42%

Conclusion

The market had a relief rally early last week which sets it up for a bad week coming up. The PPT (plunge protection team) will be busy.

The strongest sectors last week were Energy (up from the bottom last week) and Electronics while the weakest were Leisure and Precious Metals (for the 3rd week in a row).

I expect the major averages to be lower on Friday, May 13 than they were on Friday, May 6.