Technical Market Report - Monday, June 25

The good news is:

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

​The Negatives

The negatives continue to increase.

The first 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. Dashed vertical lines have been drawn on the 1st trading day of each month.

 OTC NH failed 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 continued to decline last week. 

The Positives

The secondaries have continued to outperform the blue chips.

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 hovered in modestly 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 continued to decline, but remains in comfortably positive territory.

Seasonality

Next week includes the last 5 trading days 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 1928 to 2018. There are summaries for both the 2nd year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been mixed.

Report for the last 5 days of June.
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
               Day5      Day4      Day3      Day2      Day1      Totals
 1966-2      -0.82% 5  -0.34% 1  -0.49% 2  -1.21% 3  -0.96% 4    -3.81%
 1970-2      -2.69% 3  -0.34% 4  -1.10% 5  -1.27% 1  -1.15% 2    -6.56%
 1974-2      -0.29% 1   0.60% 2  -1.36% 3  -1.84% 4  -1.13% 5    -4.03%

 1978-2      -0.99% 1  -0.30% 2   0.29% 3   0.38% 4   0.27% 5    -0.36%
 1982-2       0.15% 4  -0.37% 5   0.35% 1  -0.32% 2   0.45% 3     0.26%
 1986-2       0.53% 2   0.83% 3   0.16% 4   0.16% 5   0.49% 1     2.17%
 1990-2      -0.80% 1  -0.06% 2   0.33% 3   0.76% 4   0.41% 5     0.65%
 1994-2      -1.01% 5   1.28% 1  -0.09% 2   0.28% 3   0.28% 4     0.74%

 Avg         -0.43%     0.28%     0.21%     0.26%     0.38%       0.69%

 1998-2       1.79% 3  -0.77% 4   0.33% 5   1.16% 1   0.19% 2     2.71%
 2002-2       1.34% 1  -2.49% 2   0.38% 3   2.09% 4   0.27% 5     1.60%
 2006-2       0.58% 1  -1.57% 2   0.55% 3   2.96% 4  -0.11% 5     2.42%
 2010-2      -1.63% 4   0.27% 5  -0.13% 1  -3.85% 2  -1.21% 3    -6.55%
 2014-2      -0.42% 2   0.68% 3  -0.02% 4   0.43% 5   0.23% 1     0.90%

 Avg          0.33%    -0.77%     0.22%     0.56%    -0.12%       0.21%

OTC summary for Presidential Year 2 1966 - 2014
Averages     -0.33%    -0.20%    -0.06%    -0.02%    -0.15%      -0.76%
% Winners       38%       38%       54%       62%       62%         62%
MDD  6/30/2010  6.43% --  6/30/1970  6.40% --  6/28/1974  4.27%

OTC summary for all years 1963 - 2017
Averages     -0.28%    -0.09%     0.13%     0.07%     0.28%       0.12%
% Winners       40%       45%       56%       62%       64%         62%
MDD 6/30/2010  6.43% --  6/27/2016  6.43% --  6/30/1970  6.40%


SPX Presidential Year 2
               Day5      Day4      Day3      Day2      Day1      Totals
 1930-2       0.77% 3   2.35% 4  -0.95% 5   0.45% 6   2.81% 1     5.45%
 1934-2       2.36% 2  -0.30% 3   0.50% 4  -1.70% 5   0.00% 6     0.86%

 1938-2       2.15% 6  -1.14% 1  -0.09% 2   4.18% 3  -1.37% 4     3.73%
 1942-2       0.12% 4   0.12% 5   0.24% 6   0.36% 1   0.24% 2     1.09%
 1946-2       0.22% 1  -0.71% 2  -0.17% 3   1.55% 4   0.22% 5     1.11%
 1950-2      -5.38% 1  -1.10% 2   1.12% 3  -3.70% 4   1.43% 5    -7.64%
 1954-2       0.45% 4  -0.21% 5   0.27% 1   0.51% 2  -0.75% 3     0.28%

 Avg         -0.49%    -0.61%     0.28%     0.58%    -0.04%      -0.28%

 1958-2      -0.38% 2   0.25% 3   0.47% 4   0.13% 5   0.76% 1     1.23%
 1962-2      -0.44% 1  -0.25% 2   0.54% 3   3.44% 4   0.62% 5     3.92%
 1966-2       0.09% 5  -0.58% 1  -0.48% 2  -0.95% 3  -0.14% 4    -2.05%
 1970-2      -1.06% 3   0.07% 4  -0.74% 5  -0.79% 1  -0.23% 2    -2.75%
 1974-2       0.26% 1   1.47% 2  -1.47% 3  -1.55% 4  -0.36% 5    -1.65%

 Avg         -0.30%     0.19%    -0.34%     0.06%     0.13%      -0.26%

 1978-2      -1.30% 1   0.40% 2   0.44% 3   0.18% 4  -0.04% 5    -0.32%
 1982-2      -0.28% 4  -0.63% 5   1.03% 1  -0.05% 2  -0.54% 3    -0.47%
 1986-2       0.72% 2   0.77% 3  -0.08% 4   0.35% 5   0.50% 1     2.26%
 1990-2      -0.88% 1  -0.07% 2   0.87% 3   0.70% 4   0.11% 5     0.74%
 1994-2      -1.52% 5   1.02% 1  -0.28% 2   0.35% 3  -0.75% 4    -1.18%

 Avg         -0.65%     0.30%     0.40%     0.31%    -0.15%       0.20%

 1998-2       1.20% 3  -0.32% 4   0.35% 5   0.47% 1  -0.41% 2     1.28%
 2002-2       0.36% 1  -1.67% 2  -0.27% 3   1.76% 4   0.00% 5     0.18%
 2006-2       0.49% 1  -0.91% 2   0.55% 3   2.16% 4  -0.21% 5     2.07%
 2010-2      -1.68% 4   0.29% 5  -0.20% 1  -3.10% 2  -1.01% 3    -5.71%
 2014-2      -0.64% 2   0.49% 3  -0.12% 4   0.19% 5  -0.04% 1    -0.12%

 Avg         -0.06%    -0.42%     0.06%     0.29%    -0.33%      -0.46%

SPX summary for Presidential Year 2 1930 - 2014
Averages     -0.20%    -0.03%     0.07%     0.22%     0.04%       0.10%
% Winners       55%       45%       50%       68%       36%         59%
MDD  6/29/1950  8.88% --  6/30/2010  5.62% --  6/28/1974  3.35%

SPX summary for all years 1928 - 2017
Averages     -0.25%    -0.02%    -0.03%     0.11%     0.15%      -0.04%
% Winners       42%       45%       52%       57%       58%         50%
MDD 6/29/1950  8.88% --  6/29/1939  5.93% --  6/30/2010  5.62%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.
M2 growth has flattened out above its long-term trend.

The yield curve is continuing to compress.

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.