Technical Market Report For Saturday, Nov. 21

Technical market report for November 21, 2020

The good news is that the Russell 2000 (R2K) closed at an all time high last Tuesday.

The Negatives

Short term negatives are hard to find.

The Positives

New lows are nearly non-existent.

The first chart covers the past six months, showing the NASDAQ composite (OTC) in blue and a 10% trend (19-day EMA) of NASDAQ new highs (OTC NH) in green. Dashed vertical lines have been drawn on the first trading day of each month. The OTC NH turned sharply upward last week.

Longer-term new highs have been deteriorating. The next chart is similar to the one above, except it covers the past year.

The next chart is similar to the first one, except it shows the S&P 500 (SPX) in red and the NY NH in green. The information has been calculated with NYSE data. The NY NH recovered to a recent high last week.

The next chart is similar to the one above, except it covers the past year. The pattern is similar to the OTC chart.

The next chart covers the past six months, showing the SPX in red and a 40% trend (four-day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio) in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level. The NY HL Ratio is illustrated as above 90%, which is very strong.

The next chart is similar to the one above, except it shows the OTC in blue and the OTC HL Ratio in red. The information has been calculated with NASDAQ data. The OTC HL Ratio also spent the week above 90%.

Seasonality

Next week includes the three trading days prior to Thanksgiving and the following Friday, all during the fourth year of the Presidential Cycle. The tables below show the daily change on a percentage basis for that period.

The OTC data covers the period from 1963 to 2019, while the SPX data runs from 1953 to 2019. There are summaries for both the fourth 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.  

Day1 = the day after. The number following the year represents its position in the Presidential Cycle. The number following the daily return represents the day of the week; 1 = Monday, 2 = Tuesday, etc.

OTC Presidential Year 4 (PY4)

•   Year      Day4      Day3     Day2     Day1     Totals
•  1964-4 -0.16% 1 -0.40% 2 -0.18% 3 -0.16% 5 -0.90%
•  1968-4 0.47% 1 0.20% 2 1.52% 3 0.68% 5 2.86%
•  1972-4 -0.16% 1 0.05% 2 0.23% 3 0.40% 5 0.52%
•  1976-4 0.56% 1 -0.28% 2 0.52% 3 0.80% 5 1.61%
•  1980-4 -0.90% 1 0.58% 2 0.80% 3 0.53% 5 1.01%
•  1984-4 -0.91% 1 0.07% 2 -0.01% 3 1.00% 5 0.14%
•  1988-4 -0.68% 1 0.08% 2 0.66% 3 -0.38% 5 -0.32%
•  1992-4 -0.59% 1 1.11% 2 0.37% 3 0.18% 5 1.08%
•  1996-4 0.47% 1 0.06% 2 0.48% 3 0.41% 5 1.42%
•  Avg --    -0.52% 0.38% 0.46% 0.35% 0.67%
•  2000-4 -5.01% 1 -0.14% 2 -4.05% 3 5.41% 5 -3.79%
•  2004-4 0.70% 1 -0.04% 2 0.88% 3 -0.03% 5 1.51%
•  2008-4 6.33% 1 -0.50% 2 4.60% 3 0.23% 5 10.66%
•  2012-4 2.21% 1 0.02% 2 0.34% 3 1.38% 5 3.94%
•  2016-4 0.89% 1 0.33% 2 -0.11% 3 0.00% 5 1.11%
•  Avg --   1.02% -0.07% 0.33% 1.40% 2.69%

OTC summary for PY4 1964 - 2016

• Averages: 0.23% 0.08% 0.43% 0.75% 1.49%
• %Winners: 50%  64%   71%   71%   79%
• MDD 11/22/2000 8.98% -- 11/19/1984 .91% -- 11/24/1980 .90%

OTC summary for all years 1963 - 2019

• Averages:  -0.05% -0.17% 0.36% 0.42% 0.55%
• % Winners: 51%   55%  77%   79%   67%

SPX PY4

•    Year    Day4      Day3      Day2     Day1     Totals
•  1952-4 0.59% 1 -0.24% 2 0.63% 3 0.55% 5 1.54%
•  1956-4 -0.98% 1 -0.88% 2 -0.49% 3 1.05% 5 -1.30%
•  1960-4 0.20% 1 -0.38% 2 0.14% 3 0.59% 5 0.56%
•  1964-4 -0.32% 1 -0.31% 2 -0.34% 3 -0.33% 5 -1.30%
•  1968-4 0.17% 1 0.73% 2 0.47% 3 0.57% 5 1.93%
•  1972-4 0.03% 1 0.59% 2 0.59% 3 0.32% 5 1.53%
•  1976-4 0.66% 1 -0.61% 2 0.44% 3 0.72% 5 1.21%
•  Avg --   0.15% 0.00% 0.26% 0.37% 0.79%
•  1980-4 -0.58% 1 0.74% 2 0.60% 3 0.25% 5 1.01%
•  1984-4 -0.61% 1 0.66% 2 0.21% 3 1.46% 5 1.72%
•  1988-4 -0.09% 1 0.37% 2 0.67% 3 -0.66% 5 0.29%
•  1992-4 -0.36% 1 0.58% 2 0.37% 3 0.23% 5 0.82%
•  1996-4 1.11% 1 -0.14% 2 -0.12% 3 0.27% 5 1.11%
•  Avg --    -0.11% 0.44% 0.35% 0.31% 0.99%
•  2000-4 -1.84% 1 0.35% 2 -1.85% 3 1.47% 5 -1.87%
•  2004-4 0.59% 1 -0.03% 2 0.41% 3 0.08% 5 1.05%
•  2008-4 6.47% 1 0.66% 2 3.53% 3 0.96% 5 11.62%
•  2012-4 1.99% 1 0.07% 2 0.23% 3 1.30% 5 3.59%
•  2016-4 0.75% 1 0.22% 2 0.08% 3 0.39% 5 1.43%
•  Avg --   1.59% 0.25% 0.48% 0.84% 3.17%

SPX summary for PY4 1952 - 2016

• Averages: 0.46% 0.14% 0.33% 0.54% 1.47%
• %Winners: 59%  59%  76%  88%   82%
• MDD 11/22/2000 3.32% -- 11/21/1956 2.34% -- 11/27/1964 1.30%

SPX summary for all years 1952 - 2019

• Averages:  -0.10% 0.07% 0.34% 0.33% 0.63%
• % Winners: 46%  60%  78%   72%   69%

Conclusion

The market had a good week. New highs increased while new lows remained insignificant, and the secondaries outperformed the blue chips. The strongest sectors last week were banks and transportation (same as last week), while the weakest were biotech and precious metals. 

I expect the major averages to be higher on Friday, November 27 than they were on Friday, November 20. Last week, the blue chips (DJIA and SPX) were down, while the OTC and R2K were up. So I am calling last week's negative forecast a tie.