Technical Market Report - Monday, April 22

The good news is:​ The market has been following the average seasonal pattern pretty closely and that pattern is strong until early July.

​The Negatives

The Russell 2000 (R2K) continued to underperform the S&P 500 (SPX) last week.
There was a little deterioration in the breadth indicators.

The Positives

The breadth indicators deteriorated last week, but nothing alarming.

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.

OTC HL Ratio fell to a modestly positive 59% last week.

The next chart is similar to the one above except it shows the SPX in red and NY HL Ratio, in blue, has been calculated with NYSE data.

 NY HL Ratio also fell but ended the week at a healthy 77%.  

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.

The OTC closed at a new cycle high on Tuesday and that high was confirmed by OTC NH.  The implication of that confirmation is higher highs ahead.

The next chart is similar to the one above, except, it shows the SPX in red and NY NH, in green has been calculated with NYSE data.

 NY NH continued to fall last week failing to confirm the new cycle high for the SPX set on Tuesday. 

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of April during the 3rd year of the Presidential Cycle. The program that generates these reports looks for Fridays and Good Friday causes errors usually in late April. So the tables below show the daily change, on a percentage basis, for the last 7 trading days of April. 

OTC data covers the period from 1963 to 2018 while SPX data runs from 1928 to 2018. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Returns for the last 7 trading days of April have been mixed and stronger during the 3rd year of the Presidential Cycle than other years.

Report for the last 7 days of April.
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 3 (PY3)
               Day7      Day6      Day5      Day4      Day3      Day2      Day1      Totals
 1963-3       0.56% 1   0.31% 2   0.34% 3   0.30% 4   0.30% 5   0.24% 1   0.06% 2     2.11%
 1967-3       0.31% 4   0.49% 5   0.56% 1  -0.19% 2   0.10% 3   0.28% 4   0.83% 5     2.38%
 1971-3       0.43% 4   0.64% 5   0.40% 1   0.50% 2   0.61% 3   0.08% 4  -0.14% 5     2.51%
 1975-3      -0.68% 2  -0.38% 3  -0.22% 4   0.73% 5  -0.46% 1  -0.59% 2   0.93% 3    -0.67%

 1979-3       0.37% 5   0.15% 1   0.31% 2   0.36% 3  -0.10% 4  -0.20% 5  -0.41% 1     0.48%
 1983-3       0.71% 4   0.60% 5  -0.68% 1   0.53% 2   0.28% 3   0.66% 4   0.76% 5     2.87%
 1987-3      -0.10% 3  -0.17% 4  -1.15% 5  -0.71% 1   0.55% 2   0.55% 3   0.87% 4    -0.16%
 1991-3      -1.36% 1   0.34% 2   0.48% 3  -0.49% 4  -0.28% 5  -1.39% 1  -0.62% 2    -3.32%
 1995-3       0.30% 4   0.54% 5   0.66% 1   0.29% 2   0.68% 3   0.48% 4   0.36% 5     3.31%

 Avg         -0.01%     0.29%    -0.08%     0.00%     0.23%     0.02%     0.19%       0.64%

 1999-3       2.92% 4   1.16% 5   2.37% 1  -1.87% 2  -2.00% 3  -0.86% 4   0.57% 5     2.29%
 2003-3       1.89% 2   1.02% 3  -0.61% 4  -1.56% 5   1.93% 1   0.62% 2  -0.48% 3     2.82%
 2007-3       0.84% 5  -0.11% 1   0.03% 2   0.92% 3   0.26% 4   0.11% 5  -1.26% 1     0.80%
 2011-3       2.10% 3   0.63% 4   0.20% 1   0.77% 2   0.78% 3   0.09% 4   0.04% 5     4.61%
 2015-3       0.42% 3   0.41% 4   0.71% 5  -0.63% 1  -0.10% 2  -0.63% 3  -1.64% 4    -1.44%

 Avg          1.63%     0.62%     0.54%    -0.47%     0.18%    -0.13%    -0.55%       1.82%

OTC summary for PY3 1963 - 2015
Averages      0.62%     0.40%     0.24%    -0.07%     0.18%    -0.04%    -0.01%       1.33%
% Winners       79%       79%       71%       57%       64%       64%       57%         71%
MDD  4/29/1999  4.66% --  4/30/1991  3.29% --  4/30/2015  2.96%

OTC summary for all years 1963 - 2018
Averages      0.20%    -0.13%    -0.11%    -0.01%     0.01%     0.18%     0.16%       0.30%
% Winners       59%       54%       55%       46%       66%       66%       63%         57%
MDD 4/29/1970  10.40% --  4/24/2000  8.20% --  4/29/2002  7.79%


SPX PY3
               Day7      Day6      Day5      Day4      Day3      Day2      Day1      Totals
 1931-3       0.46% 4   0.00% 5  -2.22% 6  -1.27% 1  -0.61% 2  -2.04% 3   5.01% 4    -0.68%
 1935-3       0.32% 2  -1.27% 3   1.29% 4  -0.42% 5  -0.64% 6   0.54% 1  -1.17% 2    -1.36%

 1939-3      -0.18% 6  -1.46% 1   0.19% 2   1.02% 3   1.10% 4  -0.91% 5  -0.09% 6    -0.34%
 1943-3       0.26% 4   0.00% 6   0.00% 1   0.00% 2   0.00% 3   0.96% 4   0.00% 5     1.22%
 1947-3       0.14% 3  -0.62% 4  -0.69% 5   0.07% 6  -0.21% 1   0.21% 2   1.25% 3     0.15%
 1951-3       0.00% 1  -0.41% 2   0.05% 3   0.86% 4   1.04% 5   0.18% 6   0.00% 1     1.72%
 1955-3       0.10% 4  -0.81% 5   0.26% 1   0.52% 2  -0.52% 3  -1.13% 4   0.74% 5    -0.82%

 Avg          0.06%    -0.66%    -0.04%     0.50%     0.28%    -0.14%     0.38%       0.39%

 1959-3      -0.65% 3  -0.23% 4   0.63% 5   0.31% 1  -0.38% 2  -0.40% 3  -0.17% 4    -0.89%
 1963-3       0.10% 1   0.33% 2   0.27% 3   0.06% 4  -0.09% 5  -0.07% 1   0.22% 2     0.82%
 1967-3       0.18% 4   0.21% 5   0.35% 1   0.53% 2  -0.10% 3   0.85% 4   0.21% 5     2.23%
 1971-3       0.19% 4   0.47% 5  -0.11% 1   0.43% 2   0.36% 3  -0.13% 4  -0.65% 5     0.57%
 1975-3      -0.16% 2  -1.11% 3  -0.09% 4   0.67% 5  -0.45% 1  -0.68% 2   1.94% 3     0.11%

 Avg         -0.07%    -0.07%     0.21%     0.40%    -0.13%    -0.09%     0.31%       0.57%

 1979-3      -0.05% 5   0.34% 1   0.62% 2   0.29% 3  -0.48% 4  -0.21% 5  -0.04% 1     0.48%
 1983-3      -0.41% 4   0.23% 5  -1.00% 1   1.89% 2  -0.23% 3   0.94% 4   0.90% 5     2.31%
 1987-3      -2.01% 3  -0.13% 4  -1.85% 5   0.11% 1   0.24% 2   0.73% 3   1.33% 4    -1.57%
 1991-3      -0.85% 1   0.21% 2   0.26% 3  -0.92% 4  -0.06% 5  -1.41% 1   0.45% 2    -2.31%
 1995-3       0.07% 4   0.63% 5   0.87% 1  -0.14% 2   0.10% 3   0.17% 4   0.23% 5     1.93%

 Avg         -0.65%     0.26%    -0.22%     0.25%    -0.09%     0.04%     0.57%       0.17%

 1999-3       1.70% 4  -0.14% 5   0.24% 1   0.20% 2  -0.87% 3  -0.59% 4  -0.57% 5    -0.05%
 2003-3       2.17% 2   0.84% 3  -0.83% 4  -1.38% 5   1.78% 1   0.33% 2  -0.10% 3     2.81%
 2007-3       0.93% 5  -0.23% 1  -0.04% 2   1.01% 3  -0.08% 4  -0.01% 5  -0.78% 1     0.80%
 2011-3       1.35% 3   0.53% 4  -0.16% 1   0.90% 2   0.62% 3   0.36% 4   0.23% 5     3.83%
 2015-3       0.51% 3   0.24% 4   0.23% 5  -0.41% 1   0.28% 2  -0.37% 3  -1.01% 4    -0.55%

 Avg          1.33%     0.25%    -0.11%     0.06%     0.35%    -0.06%    -0.45%       1.37%

SPX summary for PY3 1931 - 2015
Averages      0.19%    -0.11%    -0.08%     0.20%     0.04%    -0.12%     0.36%       0.47%
% Winners       64%       45%       55%       68%       36%       45%       50%         59%
MDD  4/29/1931  6.02% --  4/24/1987  3.94% --  4/29/1991  2.74%

SPX summary for all years 1928 - 2018
Averages      0.08%    -0.13%    -0.19%     0.06%    -0.08%    -0.02%     0.22%      -0.06%
% Winners       56%       42%       48%       58%       52%       52%       56%         51%
MDD 4/29/1936  8.89% --  4/30/1938  7.18% --  4/29/1932  7.02%

Conclusion

The breadth indicators deteriorated last week, but remain in pretty good shape. Seasonality for the rest of the month is ok.

I expect the major averages to be higher on Friday, April 26 than they were on Thursday, April 18. 

Last week the Dow Jones Industrial Average and the OTC were up while the SPX and R2K were down. So I am calling last weeks positive forecast a tie.