Technical Market Report - Monday, June 18

The good news is:

The Russell 2000 (R2K) and Nasdaq composite (OTC) closed at all-time highs last week.

​The Negatives

The negatives begin to increase.

The first chart covers the past 6 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 1st trading day of each month.

OTC NH stalled in its upward move failing again to confirm the new all-time high in the index.

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

NY NH began declining last week. 

The Positives

The secondaries have been outperforming the blue chips.

New highs have been increasing, but more slowly than you would expect.

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 red.  Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio fell sharply but finished the week in positive territory.

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

OTC HL Ratio also turned downward.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of June 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 2018 while SPX data runs from 1953 to 2018. There are summaries for both the 2nd 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 by all measures.

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

OTC Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1966-2  -0.03%   0.22%   0.30%   0.27%  -0.82%  -0.06%
 1970-2   0.87%  -0.03%  -2.69%  -0.34%  -1.10%  -3.29%
 1974-2  -0.29%   0.60%  -1.36%  -1.84%  -1.13%  -4.03%

 1978-2  -0.62%  -0.72%  -1.15%   0.04%   0.05%  -2.40%
 1982-2  -0.30%   0.63%   1.07%   0.15%  -0.37%   1.18%
 1986-2  -0.01%   0.53%   0.83%   0.16%   0.16%   1.67%
 1990-2  -1.45%  -0.06%   0.06%   0.10%  -0.42%  -1.76%
 1994-2  -1.44%  -1.40%   0.56%  -1.67%  -1.01%  -4.96%

 Avg     -0.76%  -0.21%   0.27%  -0.24%  -0.32%  -1.26%

 1998-2   1.38%   2.14%   1.79%  -0.77%   0.33%   4.88%
 2002-2   1.34%  -2.49%   0.38%   2.09%   0.27%   1.60%
 2006-2  -0.92%  -0.16%   1.62%  -0.85%  -0.07%  -0.38%
 2010-2  -0.90%  -1.19%  -0.33%  -1.63%   0.27%  -3.78%
 2014-2   0.01%  -0.42%   0.68%  -0.02%   0.43%   0.69%

 Avg      0.19%  -0.42%   0.83%  -0.24%   0.25%   0.60%

OTC summary for Presidential Year 2 1966 - 2014 
 Avg     -0.18%  -0.18%   0.13%  -0.33%  -0.26%  -0.82%
 Win%       31%     38%     69%     46%     46%     38%

OTC summary for all years 1963 - 2017
 Avg     -0.10%   0.05%   0.12%  -0.06%  -0.16%  -0.16%
 Win%       44%     61%     53%     59%     54%     52%


SPX Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1954-2   0.07%   0.07%   0.17%   0.45%  -0.21%   0.55%

 1958-2  -0.36%  -0.38%   0.25%   0.47%   0.13%   0.11%
 1962-2  -0.27%  -0.36%  -1.37%  -2.17%  -1.70%  -5.87%
 1966-2  -0.03%   0.27%   0.16%  -0.40%   0.09%   0.08%
 1970-2  -0.53%  -2.45%  -1.06%   0.07%  -0.74%  -4.72%
 1974-2   0.26%   1.47%  -1.47%  -1.55%  -0.36%  -1.65%

 Avg     -0.19%  -0.29%  -0.70%  -0.72%  -0.51%  -2.41%

 1978-2   0.07%  -1.01%  -0.52%   0.24%  -0.41%  -1.62%
 1982-2  -0.07%   1.03%   1.70%  -0.28%  -0.63%   1.74%
 1986-2  -0.94%   0.72%   0.77%  -0.08%   0.35%   0.82%
 1990-2  -1.66%   0.45%   0.18%   0.38%  -1.40%  -2.06%
 1994-2  -0.65%  -0.91%   0.39%  -0.76%  -1.52%  -3.45%

 Avg     -0.65%   0.06%   0.50%  -0.10%  -0.72%  -0.91%

 1998-2   0.24%   1.48%   1.20%  -0.32%   0.35%   2.94%
 2002-2   0.36%  -1.67%  -0.27%   1.76%   0.00%   0.18%
 2006-2  -0.91%   0.00%   0.97%  -0.53%  -0.09%  -0.55%
 2010-2  -0.39%  -1.61%  -0.30%  -1.68%   0.29%  -3.69%
 2014-2  -0.01%  -0.64%   0.49%  -0.12%   0.19%  -0.09%

 Avg     -0.14%  -0.49%   0.42%  -0.18%   0.18%  -0.24%

SPX summary for Presidential Year 2 1954 - 2014 
 Avg     -0.30%  -0.22%   0.08%  -0.28%  -0.38%  -1.08%
 Win%       31%     44%     63%     38%     40%     44%

SPX summary for all years 1953 - 2017
 Avg     -0.17%   0.13%   0.04%  -0.06%  -0.19%  -0.25%
 Win%       41%     56%     51%     50%     44%     50%

Conclusion

The secondaries continued to lead the way upward last week.

However, toward the end of the week, new lows were increasing while new highs were decreasing.

I expect the major averages to be lower on Friday, June 22 than they were on Friday, June 15.

Last week the Dow Jones Industrial Average was down while the other indices were up so I am calling last weeks negative forecast a tie.