The good news is:
The Nasdaq composite (OTC) closed at an all time high last Tuesday.
The Negatives
The first chart covers the past 6 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 1st trading day of each month. Declining new highs imply narrowing leadership.
NY NH finished the week at its lowest level in over a year.
The next chart is similar to the first one except it shows the OTC in blue and OTC NH in green has been calculated with Nasdaq data.
OTC NH leveled out at its recent low with a slight blip upward while the index rose to its all time high. OTC NH clearly did not confirm the index high.
The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue. Dashed horizontal lines have been drawn, on the Y axis at 10% levels for the indicator; the line is solid at the 50%, neutral level (equal numbers of new highs and new lows).
NY HL Ratio also finished the week at its lowest level in over a year.
The next chart is similar to the one above except it was calculated with Nasdaq data and the OTC is shown in blue while OTC HL Ratio is shown in red.
OTC HL Ratio rallied a bit as the index rose to its all time high and then resumed its fall deep into 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 finished the week its lowest level in over a year.
The next chart is similar to the chart above except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.
OTC NL resumed its decline.
The Positives
Not much to say here. The all time high in the OTC was unconfirmed by everything. The SPX is less than 1% from its all time high, so it might be taken to an all time high; just for show.
Seasonality
Next week includes the last 3 trading days of September and the first 2 trading days of October 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 2025 while SPX data runs from 1928 to 2025. There are summaries for both the 2nd year of the Presidential Cycle and all years combined.
Seasonality for the coming week has been mixed.
Report for the last 3 days of September and first 2 days of October.
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 2 (PY2)
Day3 Day2 Day1 Day1 Day2 Totals
1966-2 0.27% 3 -1.06% 4 -0.96% 5 0.00% 1 -1.66% 2 -3.41%
1970-2 0.55% 1 0.49% 2 0.57% 3 0.29% 4 0.89% 5 2.78%
1974-2 -1.51% 4 -1.30% 5 -2.54% 1 -0.34% 2 0.34% 3 -5.35%
1978-2 -0.68% 3 -0.01% 4 0.67% 5 0.31% 1 -0.14% 2 0.15%
1982-2 0.21% 2 -0.41% 3 -0.32% 4 0.56% 5 -0.36% 1 -0.33%
Avg -0.23% -0.46% -0.52% 0.16% -0.19% -1.23%
1986-2 0.03% 5 -1.08% 1 0.90% 2 0.45% 3 0.01% 4 0.32%
1990-2 -1.34% 3 -2.53% 4 0.97% 5 2.94% 1 0.49% 2 0.54%
1994-2 0.61% 3 -0.09% 4 0.65% 5 -0.45% 1 -1.78% 2 -1.05%
1998-2 -0.25% 1 -0.29% 2 -2.32% 3 -4.81% 4 0.17% 5 -7.51%
2002-2 -0.06% 4 -1.84% 5 -2.26% 1 3.55% 2 -2.18% 3 -2.78%
Avg -0.20% -1.16% -0.41% 0.34% -0.66% -2.10%
2006-2 0.09% 3 0.29% 4 -0.51% 5 -0.92% 1 0.27% 2 -0.78%
2010-2 0.41% 2 -0.13% 3 -0.33% 4 0.09% 5 -1.11% 1 -1.06%
2014-2 1.02% 5 -0.14% 1 -0.28% 2 -1.59% 3 0.18% 4 -0.80%
2018-2 -0.21% 3 0.65% 4 0.05% 5 -0.11% 1 -0.47% 2 -0.10%
2022-2 2.05% 3 -2.84% 4 -1.51% 5 2.27% 1 3.34% 2 3.31%
Avg 0.67% -0.43% -0.51% -0.05% 0.44% 0.11%
OTC summary for PY2 1966 - 2022
Averages 0.08% -0.69% -0.48% 0.15% -0.13% -1.07%
% Winners 60% 20% 40% 53% 53% 33%
MDD 10/1/1998 7.53% -- 10/1/1974 5.58% -- 9/30/2022 4.31%
OTC summary for all years 1963 - 2025
Averages -0.12% -0.19% -0.01% -0.04% -0.09% -0.45%
% Winners 51% 44% 51% 53% 54% 49%
MDD 10/2/2008 9.60% -- 10/3/2000 8.54% -- 10/3/2011 8.28%
SPX PY2
Day3 Day2 Day1 Day1 Day2 Totals
1930-2 -0.72% 6 -2.23% 1 -1.43% 2 4.46% 3 -1.24% 4 -1.15%
1934-2 0.99% 4 -1.09% 5 0.22% 6 -2.97% 1 0.34% 2 -2.51%
1938-2 4.46% 3 3.66% 4 2.86% 5 1.80% 6 0.48% 1 13.25%
1942-2 0.11% 1 -0.45% 2 0.00% 3 0.79% 4 1.46% 5 1.91%
1946-2 1.13% 4 -1.05% 5 -0.99% 1 -0.27% 2 0.80% 3 -0.38%
1950-2 1.41% 3 0.05% 4 0.15% 5 1.23% 1 -0.15% 2 2.70%
1954-2 0.49% 2 -0.58% 3 -0.58% 4 -0.06% 5 0.56% 1 -0.18%
1958-2 0.18% 5 0.42% 1 0.38% 2 -0.16% 3 0.38% 4 1.21%
1962-2 -1.42% 3 -0.68% 4 0.90% 5 -1.39% 1 1.10% 2 -1.49%
Avg 0.36% -0.37% -0.03% -0.13% 0.54% 0.37%
1966-2 -1.27% 3 -1.04% 4 0.33% 5 -2.17% 1 0.27% 2 -3.88%
1970-2 -0.13% 1 0.52% 2 -0.11% 3 0.13% 4 1.00% 5 1.41%
1974-2 -1.64% 4 -2.29% 5 -2.16% 1 -0.24% 2 -0.02% 3 -6.34%
1978-2 -0.94% 3 0.30% 4 0.57% 5 0.41% 1 -0.35% 2 -0.01%
1982-2 -0.31% 2 -1.31% 3 -0.97% 4 1.26% 5 -0.38% 1 -1.70%
Avg -0.86% -0.76% -0.47% -0.12% 0.10% -2.10%
1986-2 0.17% 5 -1.00% 1 0.61% 2 0.99% 3 0.14% 4 0.91%
1990-2 -1.04% 3 -1.34% 4 1.69% 5 2.90% 1 0.09% 2 2.30%
1994-2 0.60% 3 -0.56% 4 0.10% 5 -0.21% 1 -1.55% 2 -1.61%
1998-2 0.38% 1 0.03% 2 -3.05% 3 -3.01% 4 1.64% 5 -4.01%
2002-2 1.82% 4 -3.23% 5 -1.46% 1 4.00% 2 -2.36% 3 -1.22%
Avg 0.39% -1.22% -0.42% 0.93% -0.41% -0.73%
2006-2 0.02% 3 0.19% 4 -0.25% 5 -0.34% 1 0.21% 2 -0.17%
2010-2 0.49% 2 -0.26% 3 -0.31% 4 0.44% 5 -0.80% 1 -0.44%
2014-2 0.86% 5 -0.25% 1 -0.28% 2 -1.32% 3 0.00% 4 -1.00%
2018-2 -0.33% 3 0.28% 4 0.00% 5 0.36% 1 -0.04% 2 0.27%
2022-2 1.97% 3 -2.11% 4 -1.51% 5 2.59% 1 3.06% 2 3.99%
Avg 0.60% -0.43% -0.47% 0.35% 0.49% 0.53%
SPX summary for PY2 1930 - 2022
Averages 0.30% -0.58% -0.22% 0.39% 0.19% 0.08%
% Winners 63% 33% 42% 54% 63% 38%
MDD 10/2/1974 6.20% -- 10/1/1998 5.97% -- 9/30/2002 4.64%
SPX summary for all years 1928 - 2025
Averages 0.08% -0.22% -0.01% 0.08% 0.13% 0.06%
% Winners 58% 52% 46% 52% 64% 53%
MDD 10/1/1931 11.18% -- 9/29/2008 8.79% -- 10/3/2011 6.48%
October
Since 1963, over all years, the OTC in October has been up 56% of the time with an average gain of 0.9%. During the 2nd year of the Presidential Cycle October has been up 73% time with an average gain of 2.8%. The best October ever for the OTC was 1974 (+17.2%), the worst 1987 (-27.2%).
The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the first 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.
In the chart below the blue line shows the average of the OTC in October over all years since 1963 while the black line shows the average during the 2nd year of the Presidential Cycle over the same period.
Since 1928 the SPX has been up 58% of the time in October with an average gain of 0.5%. During the 2nd year of the Presidential Cycle the SPX has been up 67% of the time with an average gain of 2.4%. The best October ever for the SPX was 1974 +16.3% the worst 1987 -21.8%.
The chart below is similar to those above except it shows the average daily performance over all years for the SPX in October in red and the performance during the 2nd year of the Presidential Cycle in black.
Since 1979 the Russell 2000 (R2K) has been up 58% of the time in October with an average gain of 0.5%. During the 2nd year of the Presidential Cycle the R2K has been up 67% of the time with an average gain of 2.4%. The best October ever for the R2K was 2011 (+15.0%), the worst 1987 (-30.7%)
The chart below is similar to those above except it shows the daily performance over all years of the R2K in October in magenta and the performance during the 2nd year of the Presidential Cycle in black.
Since 1885 the DJIA has been up 56% of the time in October with an average gain of 0.4%. During the 2nd year of the Presidential Cycle the DJIA has been up 59% of the time in October with an average gain of 1.7%. The best October ever for the DJIA 1885 (+12.3%), the worst 1987 (-23.2%).
The chart below is similar to those above except it shows the daily performance over all years of the DJIA in October in light grey and the performance during the 2nd year of the Presidential Cycle in black.
Conclusion
The all time OTC high last Tuesday was unconfirmed by everything. We may see an all time high in the SPX next week and it will be unconfirmed by the breadth indicators. In any case we are looking at the top of this cycle.
The strongest sectors last week were Electronics (for the 3rd week) and Health Care, while the weakest were Energy and Utilities.
I expect the major averages to be lower on Friday October 2 than they were on Friday September 25.
Last week the Russell 2000 was down while the other major indices were up, so I am calling last week’s positive forecast a tie.
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