Technical Market Report - Monday, July 22

The good news is:​ The breadth indicators held up pretty well for a down week.

The Negatives

Another Hindenburg Omen was triggered last Thursday when new highs and new lows both exceeded 2.3% of issues traded on the NYSE.

The overwhelming majority of the 192 new highs on the NYSE last Friday were interest rate sensitive issues, not functioning companies.

New lows reached threatening levels on both the NYSE and Nasdaq.

The Positives

The breadth indicators held up pretty well in a down week for prices.

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 but finished the week at a positive 55%.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY HL Ratio, in blue, has been calculated with NYSE data.

 NY HL Ratio declined to finish the week at a comfortable 74%.  

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.

NY NH moved upward as prices fell last week; very good.

The next chart is similar to the one above except it shows the OTC in blue and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH fell, but, is not leading the index downward.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of July during the 3rd 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 2018 while SPX data runs from 1953 to 2018. There are summaries for both the 3rd year of the Presidential Cycle and all years combined. Prior to 1953, the market traded 6 days a week so that data has been ignored.

Average returns for the coming week have been modestly negative on the Nasdaq and modestly positive on the NYSE. 

Report for the week before the 4th Friday of July.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 3 (PY3)
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1963-3  -0.27%   0.30%  -0.39%   0.99%  -0.36%   0.28%
 1967-3   0.21%  -0.33%  -0.06%   0.37%   0.76%   0.95%
 1971-3  -0.55%   0.38%  -0.05%  -0.18%   0.08%  -0.32%
 1975-3   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%

 1979-3  -0.30%   0.33%   0.69%   0.40%   0.36%   1.47%
 1983-3  -0.82%   0.28%   1.80%   0.80%  -2.69%  -0.63%
 1987-3  -0.06%   0.26%   0.29%   0.55%   0.31%   1.35%
 1991-3  -0.51%  -1.08%  -0.46%   0.59%   0.49%  -0.97%
 1995-3   1.75%   1.55%   0.65%   1.05%  -0.53%   4.46%

 Avg      0.01%   0.27%   0.59%   0.68%  -0.41%   1.14%

 1999-3  -1.19%  -3.47%   1.08%  -2.80%   0.30%  -6.08%
 2003-3   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 2007-3   0.11%  -1.89%   0.31%  -1.84%  -1.43%  -4.73%
 2011-3  -0.89%   2.22%  -0.43%   0.72%   0.86%   2.48%
 2015-3  -0.96%   0.98%   0.44%   0.33%  -0.01%   0.79%

 Avg     -0.73%  -0.54%   0.35%  -0.90%  -0.07%  -1.89%

OTC summary for PY3 1963 - 2015 
 Avg     -0.29%  -0.04%   0.32%   0.08%  -0.15%  -0.08%
 Win%       25%     67%     58%     75%     58%     58%

OTC summary for all years 1963 - 2018
 Avg     -0.29%  -0.11%   0.16%   0.06%  -0.04%  -0.22%
 Win%       45%     55%     57%     62%     60%     53%


SPX PY3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3  -0.09%  -0.61%   0.31%   0.97%   0.84%   1.42%

 1959-3   0.62%   0.50%   0.50%  -0.20%   0.02%   1.44%
 1963-3  -0.66%   0.01%   0.54%  -0.03%   0.41%   0.28%
 1967-3  -0.33%   0.01%   0.34%   0.31%   0.15%   0.48%
 1971-3  -0.18%   0.39%  -0.04%  -0.17%  -0.17%  -0.17%
 1975-3   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%

 Avg     -0.14%   0.23%   0.34%  -0.02%   0.10%   0.51%

 1979-3  -0.23%   0.37%   1.09%   0.02%   0.00%   1.26%
 1983-3  -0.21%   0.54%   2.71%  -0.14%  -0.10%   2.80%
 1987-3   0.45%   0.54%   1.06%   0.76%   0.19%   3.00%
 1991-3  -0.35%  -0.90%  -0.21%   0.61%  -0.01%  -0.85%
 1995-3   0.54%   0.80%   0.09%   0.64%  -0.41%   1.68%

 Avg      0.04%   0.27%   0.95%   0.38%  -0.08%   1.58%

 1999-3  -0.78%  -2.17%   0.16%  -1.33%  -0.29%  -4.42%
 2003-3   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 2007-3   0.49%  -1.98%   0.47%  -2.33%  -1.60%  -4.96%
 2011-3  -0.81%   1.63%  -0.07%   1.35%   0.09%   2.20%
 2015-3  -0.58%   1.24%   0.73%   0.00%  -0.23%   1.17%

 Avg     -0.42%  -0.32%   0.32%  -0.58%  -0.51%  -1.50%

SPX summary for PY3 1955 - 2015 
 Avg     -0.15%   0.03%   0.55%   0.03%  -0.08%   0.38%
 Win%       29%     71%     79%     57%     46%     71%

SPX summary for all years 1953 - 2018
 Avg     -0.17%  -0.09%   0.31%   0.17%  -0.01%   0.21%
 Win%       34%     54%     63%     62%     59%     57%

Conclusion

The breadth indicators held up well for a down week.

I expect the major averages to be higher on Friday, July 26 than they were on Friday, July 19.