The good news is: The breadth indicators held up pretty well last week.
The Negatives
Although mostly positive, Nasdaq breadth indicators have been weaker than NYSE breadth indicators and, for the past 3 weeks, the Russell 2000 (R2K) has been weaker than the S&P 500 (SPX).
Advance – Decline lines (ADL) are running totals of the daily number of declining issues subtracted from advancing issues.
The first chart covers the past 6 months showing the Nasdaq composite (OTC) in blue and an ADL calculated with Nasdaq data (OTC ADL) in green. Dashed vertical lines have been drawn on the 1st trading of each month.
Since the beginning of March, the OTC ADL has been relatively weaker than the index.
For comparison, the next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NYSE ADL has been calculated with NYSE data.
Relatively the NYSE ADL has been stronger than the index.
The next chart is from https://investorsfasttrack.com/
It covers the past year and shows the Russell 2000 (R2K) in red, the SPX in green and a relative strength indicator called Accutrack as a histogram in yellow.
Accutrack shows the R2K deteriorating relative to the SPX since the beginning of March.
The Positives
There was deterioration in most of the breadth indicators last week, but, so far, nothing alarming.
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 deteriorated last week but remained in positive territory finishing the week at 60%.
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 deteriorated a little last week, finishing the week at a strong 78%.
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.
OTC NH moved upward and, for the short term, confirmed Thursday’s OTC price high.
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 confirmed Thursday’s high for the SPX.
Seasonality
Next week includes the last 5 trading days of March 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.
Returns for the coming week have been modestly positive for the OTC and modestly negative for the SPX.
Report for the last 5 trading days of March.
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)
Day5 Day4 Day3 Day2 Day1 Totals
1963-3 0.64% 1 0.54% 2 0.38% 3 0.76% 4 0.00% 5 2.33%
1967-3 0.66% 1 0.16% 2 0.69% 3 0.20% 4 0.32% 5 2.04%
1971-3 -0.10% 4 0.45% 5 0.12% 1 0.23% 2 0.50% 3 1.21%
1975-3 -1.98% 1 -0.12% 2 1.65% 3 0.82% 4 -0.68% 1 -0.30%
1979-3 -0.36% 1 0.51% 2 0.07% 3 0.32% 4 0.36% 5 0.90%
1983-3 0.19% 5 -0.64% 1 -0.14% 2 0.75% 3 0.01% 4 0.16%
1987-3 -0.15% 3 0.28% 4 -0.42% 5 -2.24% 1 0.70% 2 -1.83%
1991-3 -0.10% 5 0.94% 1 2.15% 2 0.79% 3 -0.01% 4 3.77%
1995-3 0.48% 1 0.43% 2 -0.84% 3 -0.28% 4 0.04% 5 -0.17%
Avg 0.01% 0.30% 0.16% -0.13% 0.22% 0.57%
1999-3 2.94% 4 -0.64% 5 3.04% 1 -0.50% 2 -0.76% 3 4.08%
2003-3 1.55% 2 -0.26% 3 -0.23% 4 -1.06% 5 -2.08% 1 -2.07%
2007-3 0.27% 1 -0.74% 2 -0.83% 3 0.03% 4 0.16% 5 -1.11%
2011-3 0.24% 5 -0.45% 1 0.96% 2 0.72% 3 0.15% 4 1.63%
2015-3 -2.37% 3 -0.27% 4 0.57% 5 1.15% 1 -0.94% 2 -1.86%
Avg 0.53% -0.47% 0.70% 0.07% -0.69% 0.13%
OTC summary for PY3 1963 - 2015
Averages 0.14% 0.01% 0.51% 0.12% -0.16% 0.63%
% Winners 57% 50% 64% 71% 57% 57%
MDD 3/31/2003 3.58% -- 3/30/1987 2.65% -- 3/26/2015 2.63%
OTC summary for all years 1963 - 2018
Averages 0.04% 0.05% -0.18% -0.06% 0.17% 0.01%
% Winners 55% 46% 57% 59% 64% 55%
MDD 3/30/2000 10.18% -- 3/27/1980 7.82% -- 3/29/2001 7.69%
SPX PY3
Day5 Day4 Day3 Day2 Day1 Totals
1931-3 -1.35% 4 -1.88% 5 -2.15% 6 -1.07% 1 0.18% 2 -6.27%
1935-3 -0.83% 2 1.08% 3 0.12% 4 0.00% 5 0.24% 6 0.60%
1939-3 -0.42% 1 -1.33% 2 0.76% 3 -3.44% 4 -4.60% 5 -9.03%
1943-3 0.80% 5 0.27% 6 1.41% 1 0.87% 2 -0.09% 3 3.26%
1947-3 1.40% 3 1.12% 4 -0.45% 5 -0.13% 6 -0.91% 1 1.01%
1951-3 -0.09% 2 -1.16% 3 0.33% 4 0.70% 5 -0.37% 6 -0.60%
1955-3 0.08% 5 -0.35% 1 0.05% 2 -0.90% 3 0.16% 4 -0.95%
Avg 0.35% -0.29% 0.42% -0.58% -1.16% -1.26%
1959-3 0.16% 2 -0.14% 3 -0.21% 4 -0.56% 1 -0.02% 2 -0.77%
1963-3 0.03% 1 0.29% 2 0.42% 3 -0.15% 4 -0.02% 5 0.57%
1967-3 -0.08% 1 0.04% 2 -0.20% 3 -0.03% 4 -0.55% 5 -0.82%
1971-3 -0.01% 4 0.34% 5 0.08% 1 0.23% 2 0.05% 3 0.69%
1975-3 -2.36% 1 0.79% 2 1.86% 3 0.31% 4 -0.58% 1 0.01%
Avg -0.45% 0.26% 0.39% -0.04% -0.22% -0.06%
1979-3 -0.55% 1 1.43% 2 -0.35% 3 -0.09% 4 -0.43% 5 0.00%
1983-3 -0.46% 5 -0.54% 1 -0.17% 2 1.19% 3 -0.28% 4 -0.26%
1987-3 -0.42% 3 0.18% 4 -1.60% 5 -2.34% 1 0.86% 2 -3.31%
1991-3 0.25% 5 0.64% 1 1.75% 2 -0.25% 3 -0.03% 4 2.35%
1995-3 0.45% 1 0.14% 2 -0.15% 3 -0.18% 4 -0.30% 5 -0.05%
Avg -0.15% 0.37% -0.10% -0.33% -0.04% -0.25%
1999-3 1.69% 4 -0.56% 5 2.14% 1 -0.72% 2 -1.11% 3 1.44%
2003-3 1.22% 2 -0.55% 3 -0.16% 4 -0.58% 5 -1.77% 1 -1.85%
2007-3 0.10% 1 -0.62% 2 -0.80% 3 0.37% 4 -0.12% 5 -1.06%
2011-3 0.32% 5 -0.27% 1 0.71% 2 0.67% 3 -0.18% 4 1.23%
2015-3 -1.46% 3 -0.24% 4 0.24% 5 1.22% 1 -0.88% 2 -1.11%
Avg 0.37% -0.45% 0.42% 0.19% -0.81% -0.27%
SPX summary for PY3 1931 - 2015
Averages -0.07% -0.06% 0.16% -0.22% -0.49% -0.68%
% Winners 50% 50% 55% 36% 23% 45%
MDD 3/31/1939 8.80% -- 3/30/1931 6.30% -- 3/30/1987 4.12%
SPX summary for all years 1928 - 2018
Averages -0.04% 0.01% -0.06% -0.02% -0.12% -0.22%
% Winners 37% 48% 53% 46% 43% 53%
MDD 3/31/1938 9.09% -- 3/31/1939 8.80% -- 3/31/1932 7.00%Report for the last 5 trading days of March.
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)
Day5 Day4 Day3 Day2 Day1 Totals
1963-3 0.64% 1 0.54% 2 0.38% 3 0.76% 4 0.00% 5 2.33%
1967-3 0.66% 1 0.16% 2 0.69% 3 0.20% 4 0.32% 5 2.04%
1971-3 -0.10% 4 0.45% 5 0.12% 1 0.23% 2 0.50% 3 1.21%
1975-3 -1.98% 1 -0.12% 2 1.65% 3 0.82% 4 -0.68% 1 -0.30%
1979-3 -0.36% 1 0.51% 2 0.07% 3 0.32% 4 0.36% 5 0.90%
1983-3 0.19% 5 -0.64% 1 -0.14% 2 0.75% 3 0.01% 4 0.16%
1987-3 -0.15% 3 0.28% 4 -0.42% 5 -2.24% 1 0.70% 2 -1.83%
1991-3 -0.10% 5 0.94% 1 2.15% 2 0.79% 3 -0.01% 4 3.77%
1995-3 0.48% 1 0.43% 2 -0.84% 3 -0.28% 4 0.04% 5 -0.17%
Avg 0.01% 0.30% 0.16% -0.13% 0.22% 0.57%
1999-3 2.94% 4 -0.64% 5 3.04% 1 -0.50% 2 -0.76% 3 4.08%
2003-3 1.55% 2 -0.26% 3 -0.23% 4 -1.06% 5 -2.08% 1 -2.07%
2007-3 0.27% 1 -0.74% 2 -0.83% 3 0.03% 4 0.16% 5 -1.11%
2011-3 0.24% 5 -0.45% 1 0.96% 2 0.72% 3 0.15% 4 1.63%
2015-3 -2.37% 3 -0.27% 4 0.57% 5 1.15% 1 -0.94% 2 -1.86%
Avg 0.53% -0.47% 0.70% 0.07% -0.69% 0.13%
OTC summary for PY3 1963 - 2015
Averages 0.14% 0.01% 0.51% 0.12% -0.16% 0.63%
% Winners 57% 50% 64% 71% 57% 57%
MDD 3/31/2003 3.58% -- 3/30/1987 2.65% -- 3/26/2015 2.63%
OTC summary for all years 1963 - 2018
Averages 0.04% 0.05% -0.18% -0.06% 0.17% 0.01%
% Winners 55% 46% 57% 59% 64% 55%
MDD 3/30/2000 10.18% -- 3/27/1980 7.82% -- 3/29/2001 7.69%
SPX PY3
Day5 Day4 Day3 Day2 Day1 Totals
1931-3 -1.35% 4 -1.88% 5 -2.15% 6 -1.07% 1 0.18% 2 -6.27%
1935-3 -0.83% 2 1.08% 3 0.12% 4 0.00% 5 0.24% 6 0.60%
1939-3 -0.42% 1 -1.33% 2 0.76% 3 -3.44% 4 -4.60% 5 -9.03%
1943-3 0.80% 5 0.27% 6 1.41% 1 0.87% 2 -0.09% 3 3.26%
1947-3 1.40% 3 1.12% 4 -0.45% 5 -0.13% 6 -0.91% 1 1.01%
1951-3 -0.09% 2 -1.16% 3 0.33% 4 0.70% 5 -0.37% 6 -0.60%
1955-3 0.08% 5 -0.35% 1 0.05% 2 -0.90% 3 0.16% 4 -0.95%
Avg 0.35% -0.29% 0.42% -0.58% -1.16% -1.26%
1959-3 0.16% 2 -0.14% 3 -0.21% 4 -0.56% 1 -0.02% 2 -0.77%
1963-3 0.03% 1 0.29% 2 0.42% 3 -0.15% 4 -0.02% 5 0.57%
1967-3 -0.08% 1 0.04% 2 -0.20% 3 -0.03% 4 -0.55% 5 -0.82%
1971-3 -0.01% 4 0.34% 5 0.08% 1 0.23% 2 0.05% 3 0.69%
1975-3 -2.36% 1 0.79% 2 1.86% 3 0.31% 4 -0.58% 1 0.01%
Avg -0.45% 0.26% 0.39% -0.04% -0.22% -0.06%
1979-3 -0.55% 1 1.43% 2 -0.35% 3 -0.09% 4 -0.43% 5 0.00%
1983-3 -0.46% 5 -0.54% 1 -0.17% 2 1.19% 3 -0.28% 4 -0.26%
1987-3 -0.42% 3 0.18% 4 -1.60% 5 -2.34% 1 0.86% 2 -3.31%
1991-3 0.25% 5 0.64% 1 1.75% 2 -0.25% 3 -0.03% 4 2.35%
1995-3 0.45% 1 0.14% 2 -0.15% 3 -0.18% 4 -0.30% 5 -0.05%
Avg -0.15% 0.37% -0.10% -0.33% -0.04% -0.25%
1999-3 1.69% 4 -0.56% 5 2.14% 1 -0.72% 2 -1.11% 3 1.44%
2003-3 1.22% 2 -0.55% 3 -0.16% 4 -0.58% 5 -1.77% 1 -1.85%
2007-3 0.10% 1 -0.62% 2 -0.80% 3 0.37% 4 -0.12% 5 -1.06%
2011-3 0.32% 5 -0.27% 1 0.71% 2 0.67% 3 -0.18% 4 1.23%
2015-3 -1.46% 3 -0.24% 4 0.24% 5 1.22% 1 -0.88% 2 -1.11%
Avg 0.37% -0.45% 0.42% 0.19% -0.81% -0.27%
SPX summary for PY3 1931 - 2015
Averages -0.07% -0.06% 0.16% -0.22% -0.49% -0.68%
% Winners 50% 50% 55% 36% 23% 45%
MDD 3/31/1939 8.80% -- 3/30/1931 6.30% -- 3/30/1987 4.12%
SPX summary for all years 1928 - 2018
Averages -0.04% 0.01% -0.06% -0.02% -0.12% -0.22%
% Winners 37% 48% 53% 46% 43% 53%
MDD 3/31/1938 9.09% -- 3/31/1939 8.80% -- 3/31/1932 7.00%
Conclusion
The market was having a good week until Friday. Although there has been some deterioration in some of the breadth indicators, if a top is developing, it will take a little longer.
I expect the major averages to be higher on Friday, March 29 than they were on Friday, March 22.
Last weeks positive forecast was a miss.
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