Technical Market Report For Saturday, Nov. 13

Technical Market Report for Saturday, Nov. 13, 2021

The good news is that last week was pretty quiet, considering all of the major indices were coming off of all-time highs.

The Negatives

The first chart covers the past six 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 first trading day of each month. 

After failing to confirm the all-time index highs, the NY NH fell from its relatively low level.

The next chart covers the past six months, showing the Nasdaq composite (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).

There were a lot of new lows when the indices closed at all-time highs a week ago, and they increased when the market declined last week.

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

The Positives

Many of the breadth indicators remained positive through last week's decline. The next chart is similar to the first one, except it shows the OTC in blue and the OTC NH in green. The OTC NH information has been calculated with Nasdaq data.

The OTC NH declined from its confirmation of the all-time high of a week ago. The confirmation implies higher prices ahead.

The next chart covers the past six months, showing the 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 declined sharply, but it remained in positive territory.

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 declined, but finished the week at a strong 79%. 

Seasonality

Next week includes the five trading days prior to the third Friday of November 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 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   0.25%   0.27%  -0.11%   0.14%  -0.22%   0.35%

 1969-1  -0.07%   0.05%  -0.23%   0.26%  -0.88%  -0.88%

 1973-1  -0.65%  -0.32%  -2.64%  -0.34%  -0.25%  -4.20%

 1977-1   0.04%   0.53%   0.04%   0.30%   0.35%   1.26%

 1981-1  -1.50%   0.26%  -0.04%  -0.14%   0.65%  -0.77%

 1985-1   0.76%   0.69%  -0.18%   0.45%   0.31%   2.04%

 1989-1  -0.05%  -0.42%   0.40%  -0.12%   0.32%   0.12%

 1993-1  -0.88%  -0.10%  -1.21%  -1.05%  -0.37%  -3.61%

 1997-1   1.93%  -0.85%   0.05%   1.59%  -0.36%   2.36%

  Avg:      0.05%  -0.08%  -0.20%   0.14%   0.11%   0.03%

 2001-1   0.64%   2.82%   0.59%  -0.14%  -0.10%   3.81%

 2005-1  -0.07%  -0.65%   0.05%   1.49%   0.30%   1.12%

 2009-1   1.38%   0.27%  -0.48%  -1.66%  -0.50%  -0.99%

 2013-1   0.01%   0.00%   1.16%   0.18%   0.33%   1.70%

 2017-1   0.10%  -0.29%  -0.47%   1.29%  -0.15%   0.48%

   Avg:      0.41%   0.43%   0.17%   0.23%  -0.03%   1.22%

OTC Summary for PY1 (1965 - 2017)

•  Avg:   0.14%   0.16%  -0.22%   0.16%  -0.04%   0.20%
•  Win%     57%     57%     43%     57%     43%     64%

OTC Summary for All Years 1963 - 2020

•  Avg:  -0.14%   0.11%  -0.09%   0.09%   0.04%   0.02%
•  Win%:    46%     54%     53%     57%     53%     59%

Year  1

   Year        Mon      Tue       Wed      Thur      Fri      Totals

 1953-1  -0.65%  -0.53%   0.16%   0.45%   0.16%  -0.40%

 1957-1  -0.02%  -1.44%  -0.13%  -0.28%   2.36%   0.49%

 1961-1   0.28%   0.55%   0.01%  -0.07%   0.00%   0.77%

 1965-1   0.09%  -0.24%   0.21%  -0.41%   0.02%  -0.33%

 1969-1  -0.68%  -0.02%  -0.51%  -1.03%  -0.62%  -2.86%

 1973-1  -0.82%  -0.08%  -1.83%  -0.02%   1.42%  -1.33%

 1977-1  -0.69%   0.64%  -0.50%  -0.30%   0.18%  -0.67%

   Avg:    -0.36%   0.17%  -0.52%  -0.37%   0.25%  -0.88%

 1981-1  -1.18%   0.76%  -0.73%   0.37%   0.83%   0.05%

 1985-1   1.84%   0.41%  -0.49%   0.99%  -0.48%   2.27%

 1989-1   0.13%  -0.46%   0.75%   0.01%   0.30%   0.74%

 1993-1  -0.35%   0.64%  -0.41%  -0.26%  -0.22%  -0.60%

 1997-1   1.92%  -0.84%   0.68%   1.52%   0.43%   3.71%

   Avg:     0.47%   0.10%  -0.04%   0.53%   0.17%   1.23%

 2001-1  -0.18%   1.86%   0.19%   0.09%  -0.31%   1.64%

 2005-1  -0.08%  -0.39%   0.18%   0.94%   0.44%   1.10%

 2009-1   1.45%   0.08%  -0.03%  -1.34%  -0.32%  -0.17%

 2013-1   0.07%  -0.24%   0.81%   0.48%   0.42%   1.55%

 2017-1   0.10%  -0.23%  -0.55%   0.82%  -0.26%  -0.13%

   Avg:     0.27%   0.22%   0.12%   0.20%  -0.01%   0.80%

SPX Summary for PY1 (1953 - 2017) 

• Avg:   0.07%   0.03%  -0.13%   0.12%   0.27%   0.34%
• Win%:   47%     41%     47%     53%     63%     53%

SPX Summary for All Years 1953 - 2020

• Avg:  -0.01%   0.00%  -0.06%  -0.02%   0.13%   0.03%
• Win%:    48%     46%     59%     53%     61%     53%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms. M2 growth continued to level off. Perhaps the Fed has quit calculating M2.

Here are Treasury rates at their close last Friday and their changes from last month:

• 2-year yield: 0.524%, up from 0.395%.
• 5-year yield: 1.229%, up from 1.126%.
• 10-year yield: 1.566%, down from 1.575%.
• 30-year yield: 1.934%, down from 2.042%.

The next chart is a close up that shows just the past year from the chart above.

Conclusion

There's not much to see here. The breadth indicators fell modestly along with prices. The confirmed highs of the previous week suggest higher prices may lie ahead.

The strongest sectors last week were precious metals and basic materials, while the weakest were energy (same as last week) and biotech. I expect the major averages to be higher on Friday, Nov. 19 than they were on Friday, Nov. 12. Last weeks positive forecast was a miss.