Technical Market Report For Saturday, Oct. 3

Technical market report for October 3, 2020

The good news is that new lows held to non-threatening levels this past week.

The Negatives

Less positive news includes how leadership continues to narrow.

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. New highs picked up slightly.

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 Positives

There have been few new highs, but scarce new lows, as well.

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 recovered, finishing the week at 71%.

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 recovered enough to finish the week at 64%. 

Seasonality

Next week includes the five trading days prior to the second Friday of October, 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.

Returns for the coming week have been modestly positive on average over all years, but very negative during the fourth year of the Presidential Cycle.  The average returns were impacted by huge losses in 2008.

The number following the year is the position in the Presidential Cycle.

OTC Presidential Year 4 (PY4)

•    Year      Mon      Tue       Wed      Thur       Fri      Totals
•  1964-4   0.07%   0.19%   0.30%   0.35%   1.04%   1.94%
•  1968-4  -0.12%  -0.53%   0.00%   0.42%  -0.35%  -0.58%
•  1972-4   0.30%   0.40%  -0.35%  -0.54%  -0.53%  -0.73%
•  1976-4   0.02%  -0.78%  -0.80%   0.67%  -0.28%  -1.17%
•  1980-4   1.33%   0.08%   0.51%   0.18%   0.13%   2.24%
•  1984-4  -0.37%  -0.20%  -0.32%   0.59%   0.56%   0.27%
•  1988-4  -0.05%  -0.05%  -0.71%   0.24%   0.29%  -0.28%
•  1992-4  -1.12%   0.94%  -0.24%   0.82%  -0.59%  -0.18%
•  1996-4   0.26%  -0.86%  -0.18%  -0.08%   0.91%   0.06%
•  Avg         0.01%  -0.02%  -0.18%   0.35%   0.26%   0.42%
•  2000-4  -0.16%  -3.43%  -2.22%  -2.96%   7.87%  -0.90%
•  2004-4   0.53%   0.16%   0.79%  -1.14%  -1.47%  -1.13%
•  2008-4  -4.34%  -5.80%  -0.83%  -5.47%   0.27% -16.17%
•  2012-4  -0.76%  -1.52%  -0.43%  -0.08%  -0.17%  -2.96%
•  2016-4   0.69%  -1.54%  -0.15%  -0.49%   0.02%  -1.47%
•  Avg        -0.81%  -2.43%  -0.57%  -2.03%   1.30%  -4.53%

OTC summary for PY4 1964 - 2016 

•  Avg     -0.27%  -0.93%  -0.35%  -0.54%   0.55%  -1.50%
•  Win%       50%     36%     23%     50%     57%     29%

OTC summary for all years 1963 - 2019

•  Avg     -0.04%  -0.39%  -0.10%   0.17%   0.53%   0.18%
•  Win%       56%     46%     50%     67%     72%     56%

SPX PY4

•     Year       Mon     Tue       Wed      Thur      Fri      Totals
•  1956-4  -0.04%  -0.50%   1.39%  -0.06%   0.41%   1.19%
•  1960-4   0.20%   0.15%  -0.13%   0.78%   0.53%   1.53%
•  1964-4   0.45%   0.06%   0.01%   0.28%   0.21%   1.02%
•  1968-4  -0.01%   0.04%   0.00%  -0.43%  -0.11%  -0.51%
•  1972-4   0.26%   0.08%  -0.45%  -0.82%  -0.63%  -1.56%
•  1976-4  -0.13%  -0.77%  -0.25%   0.55%  -0.95%  -1.55%
•  Avg         0.15%  -0.09%  -0.20%   0.07%  -0.19%  -0.21%
•  1980-4   1.86%  -0.55%   0.50%  -0.46%  -0.57%   0.76%
•  1984-4  -0.34%  -0.28%   0.27%   0.41%   0.86%   0.92%
•  1988-4   0.06%  -0.11%  -1.42%   0.45%   0.10%  -0.92%
•  1992-4  -0.71%  -0.10%  -0.72%   0.87%  -1.25%  -1.90%
•  1996-4   0.27%  -0.39%  -0.56%  -0.31%   0.87%  -0.11%
•  Avg         0.23%  -0.29%  -0.39%   0.19%   0.00%  -0.25%
•  2000-4  -0.49%  -1.07%  -1.62%  -2.55%   3.34%  -2.39%
•  2004-4   0.32%  -0.06%   0.67%  -1.00%  -0.75%  -0.82%
•  2008-4  -3.85%  -5.74%  -1.13%  -7.62%  -1.18% -19.52%
•  2012-4  -0.35%  -0.99%  -0.62%   0.02%  -0.30%  -2.23%
•  2016-4   0.46%  -1.24%   0.11%  -0.31%   0.02%  -0.96%
•  Avg        -0.78%  -1.82%  -0.52%  -2.29%   0.23%  -5.18%

SPX summary for PY4 1956 - 2016 

•  Avg     -0.13%  -0.72%  -0.26%  -0.64%   0.04%  -1.69%
•  Win%       50%     25%     40%     44%     50%     31%

SPX summary for all years 1953 - 2019

•  Avg      0.10%  -0.29%   0.10%  -0.10%   0.19%   0.00%
•  Win%       53%     35%     50%     43%     58%     57%

Conclusion

Seasonality will continue to be a problem for the next week or so. The strongest sectors last week were Utilities (for the second week in a row) and Finance. The weakest sectors were Telecomm and Energy. 

I expect the major averages to be lower on Friday, October 9 than they were on Friday, October 2. Last week's negative forecast was a miss.