Technical Market Report - Monday, July 29

The good news is: The S&P 500 (SPX) and Nasdaq composite (OTC) closed at all-time highs last Friday.

The Negatives

New lows remained at threatening levels on both the NYSE and Nasdaq.

The first chart covers the past 6 months showing OTC in blue and a 10% trend (19 day EMA) of Nasdaq new lows (OTC NL) in brown. Dashed vertical lines have been drawn on the 1st trading day of each month. OTC NL has been plotted on an inverted Y-axis to decreasing new lows move the indicator upward (up is good).

For the past 2 weeks, OTC NL has been moving downward (new lows increasing) as the index has been hitting new highs.

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

The pattern is similar to the chart above.

The Positives

New highs confirmed the index highs.

The next chart covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

OTC HL Ratio rose slightly for the week after taking a short dip into negative territory.

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 finished last week at the same point it was the week before.

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 confirming the new index high.

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 also confirmed the new index high.

Seasonality

Next week includes the last 3 trading days of July and the first 2 trading days of August 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 1928 to 2018. There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

Average returns for the coming week have been mostly negative.

Report for the last 3 days of July and the first 2 days of August.
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)
Day3 Day2 Day1 Day1 Day2 Totals
1963-3 -0.36% 1 0.18% 2 0.90% 3 -0.27% 4 -0.12% 5 0.33%
1967-3 0.37% 4 0.76% 5 0.09% 1 0.44% 2 0.50% 3 2.15%
1971-3 -1.03% 3 -1.53% 4 -0.51% 5 0.30% 1 -1.12% 2 -3.88%
1975-3 -0.51% 2 0.44% 3 0.19% 4 -1.65% 5 -1.03% 1 -2.55%

1979-3 0.36% 5 0.37% 1 0.56% 2 0.40% 3 0.45% 4 2.15%
1983-3 1.50% 3 -2.09% 4 -1.54% 5 -0.53% 1 0.36% 2 -2.30%
1987-3 0.29% 3 0.55% 4 0.31% 5 -0.41% 1 -0.08% 2 0.65%
1991-3 0.13% 1 1.00% 2 0.76% 3 0.42% 4 0.30% 5 2.61%
1995-3 1.05% 4 -0.53% 5 -0.41% 1 -1.01% 2 -0.74% 3 -1.64%

Avg 0.67% -0.14% -0.06% -0.23% 0.06% 0.29%

1999-3 0.97% 3 -2.43% 4 -0.06% 5 -0.56% 1 -1.36% 2 -3.44%
2003-3 -0.23% 2 -0.60% 3 0.82% 4 -1.12% 5 -0.09% 1 -1.22%
2007-3 -1.43% 5 0.82% 1 -1.43% 2 0.30% 3 0.87% 4 -0.87%
2011-3 -2.65% 3 0.05% 4 -0.36% 5 -0.43% 1 -2.75% 2 -6.12%
2015-3 0.44% 3 0.33% 4 -0.01% 5 -0.25% 1 -0.19% 2 0.32%

Avg -0.58% -0.37% -0.21% -0.41% -0.70% -2.27%

OTC summary for PY3 1963 - 2015
Averages -0.08% -0.19% -0.05% -0.31% -0.36% -0.99%
% Winners 57% 64% 50% 36% 36% 43%
MDD 8/2/2011 6.01% -- 8/3/1999 4.35% -- 8/1/1983 4.11%

OTC summary for all years 1963 - 2018
Averages -0.13% -0.02% -0.04% -0.01% -0.15% -0.34%
% Winners 45% 61% 50% 55% 39% 50%
MDD 8/2/2000 8.26% -- 8/2/2002 7.16% -- 8/4/1998 6.98%

Year 3
Day3 Day2 Day1 Day1 Day2 Totals
1931-3 -3.10% 3 0.44% 4 -0.51% 5 0.80% 6 0.65% 1 -1.72%
1935-3 1.10% 1 -0.91% 2 1.28% 3 -0.36% 4 -0.82% 5 0.30%

1939-3 -0.33% 5 -0.25% 6 -0.58% 1 0.00% 2 1.00% 3 -0.16%
1943-3 1.68% 4 -1.90% 5 -1.43% 6 -1.80% 1 2.18% 2 -1.27%
1947-3 -2.20% 2 -0.45% 3 1.55% 4 0.25% 5 -1.14% 1 -1.98%
1951-3 0.27% 5 0.44% 1 -1.02% 2 0.49% 3 1.38% 4 1.56%
1955-3 0.41% 3 -0.59% 4 0.05% 5 -1.36% 1 0.23% 2 -1.26%

Avg -0.03% -0.55% -0.29% -0.48% 0.73% -0.62%

1959-3 0.50% 3 -0.20% 4 0.02% 5 0.33% 1 -0.16% 2 0.48%
1963-3 0.19% 1 0.83% 2 -0.16% 3 -0.09% 4 0.33% 5 1.11%
1967-3 0.31% 4 0.15% 5 0.28% 1 0.65% 2 0.43% 3 1.82%
1971-3 -0.73% 3 -1.08% 4 -0.46% 5 0.40% 1 -1.51% 2 -3.38%
1975-3 -0.56% 2 0.73% 3 -0.09% 4 -0.86% 5 -0.95% 1 -1.74%

Avg -0.06% 0.08% -0.08% 0.09% -0.37% -0.34%

1979-3 0.00% 5 0.05% 1 0.64% 2 0.35% 3 -0.07% 4 0.97%
1983-3 -1.62% 3 -1.52% 4 -1.50% 5 -0.32% 1 -0.02% 2 -4.98%
1987-3 1.06% 3 0.76% 4 0.19% 5 -0.34% 1 -0.42% 2 1.25%
1991-3 0.58% 1 0.92% 2 0.29% 3 -0.18% 4 0.02% 5 1.63%
1995-3 0.64% 4 -0.41% 5 -0.15% 1 -0.43% 2 -0.15% 3 -0.50%

Avg 0.13% -0.04% -0.11% -0.18% -0.13% -0.33%

1999-3 0.18% 3 -1.79% 4 -0.92% 5 -0.05% 1 -0.44% 2 -3.01%
2003-3 -0.73% 2 -0.18% 3 0.29% 4 -1.03% 5 0.27% 1 -1.38%
2007-3 -1.60% 5 1.03% 1 -1.26% 2 0.72% 3 0.44% 4 -0.68%
2011-3 -2.03% 3 -0.32% 4 -0.65% 5 -0.41% 1 -2.56% 2 -5.97%
2015-3 0.73% 3 0.00% 4 -0.23% 5 -0.28% 1 -0.22% 2 0.01%

Avg -0.69% -0.25% -0.55% -0.21% -0.50% -2.21%

SPX summary for PY3 1931 - 2015
Averages -0.24% -0.19% -0.20% -0.16% -0.07% -0.86%
% Winners 55% 45% 41% 36% 45% 41%
MDD 8/2/2011 5.85% -- 8/2/1943 5.05% -- 8/2/1983 4.90%

SPX summary for all years 1928 - 2018
Averages 0.08% 0.13% 0.05% 0.10% -0.03% 0.33%
% Winners 51% 61% 60% 52% 49% 58%
MDD 7/31/1933 6.84% -- 8/4/1998 6.19% -- 8/2/2011 5.85%

August

Since 1963, over all years, the OTC in August has been up 61% of the time with an average gain of 0.4%. During the 3rd year of the Presidential Cycle August has been up 71% time with an average gain of 1.0%. The worst August ever, 1998 (-19.9%), the best 2000 (+11.7%).

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 1st 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 August over all years since 1963 while the black line shows the average during the 3rd year of the Presidential Cycle.

Since 1928 the SPX has been up 59% of the time in August with an average gain of 0.7%. During the 3rd year of the Presidential Cycle, the SPX has been up 55% of the time with an average gain of 0.2%. The best ever August for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).

The chart below is similar to the one above except it shows the daily performance over all years for the SPX in August in red and the performance during the 3rd year of the Presidential Cycle in black. There must have been some large moves in the middle of Augusts past because there is a significant discrepancy between what is shown on the chart and the actual averages. Prior to 1953, the market traded 6 days a week so a lot of middle of the month data has been left out.

Since 1979 the Russell 2000 (R2K) has been up 58% of the time in August with an average gain of 0.3%. During the 3rd year of the Presidential Cycle, the R2K has been up 60% of the time with an average change of 0.0%. The best ever August for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in August in magenta and the performance during the 3rd year of the Presidential Cycle in black.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 65% of the time in August with an average gain of 1.2%. During the 3rd year of the Presidential Cycle, the DJIA has been up 70% of the time with an average gain of 1.0%. The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)

The chart below is similar to those above except it shows the daily performance overall years of the DJIA in August in grey and the performance during the 3rd year of the Presidential Cycle in black.