Technical Market Report - Monday, May 6

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

The Negatives

Volume is at a 7 month low.

The Positives

All-time highs for both the OTC & SPX last week.

The first 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 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 rose a little to a modestly positive 68% last week.

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 rose ending the week at a healthy 83%.  

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.

The OTC closed at a new all-time high on Friday and that high was, for all practical purposes confirmed by OTC NH.  The implication of that confirmation is higher highs ahead.

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 turned sharply upward last week. 

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of May 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.

The average returns for the coming week have been mixed.

Report for the week before the 2nd Friday of May.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3 (PY3)
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1963-3  -0.45%  -0.51%   0.09%   0.09%  -0.06%  -0.84%
 1967-3   1.17%  -0.65%  -1.31%  -0.64%   0.53%  -0.89%
 1971-3  -0.46%   0.16%   0.04%   0.16%   0.17%   0.07%
 1975-3   1.11%  -0.41%   1.24%   0.38%   0.85%   3.17%

 1979-3  -2.33%  -0.77%   0.57%  -0.48%  -0.02%  -3.03%
 1983-3   0.33%   0.56%  -0.48%  -0.24%   0.59%   0.76%
 1987-3   0.00%   0.95%  -0.01%   0.06%   0.13%   1.13%
 1991-3  -0.13%   0.01%   0.20%   1.08%  -0.88%   0.28%
 1995-3   0.68%  -0.13%  -0.06%   0.73%   0.60%   1.82%

 Avg     -0.29%   0.12%   0.04%   0.23%   0.08%   0.19%

 1999-3   0.91%   1.60%   1.55%  -0.94%  -2.10%   1.02%
 2003-3   0.08%   1.31%  -1.11%  -1.13%   2.04%   1.18%
 2007-3  -0.05%   0.03%   0.18%  -1.65%   1.12%  -0.37%
 2011-3   0.55%   1.01%  -0.93%   0.63%  -1.21%   0.05%
 2015-3   0.23%  -1.55%  -0.40%   0.53%   1.17%  -0.02%

 Avg      0.35%   0.48%  -0.14%  -0.51%   0.21%   0.38%

OTC summary for PY3 1963 - 2015
 Avg      0.12%   0.11%  -0.03%  -0.10%   0.21%   0.31%
 Win%       64%     57%     50%     57%     64%     64%

OTC summary for all years 1963 - 2018
 Avg      0.08%  -0.11%  -0.02%  -0.07%   0.07%  -0.04%
 Win%       59%     52%     52%     55%     59%     54%


SPX PY3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3   0.11%  -0.21%  -1.14%  -0.59%   0.65%  -1.18%

 1959-3   0.00%   0.17%  -0.24%  -1.27%   0.77%  -0.56%
 1963-3  -0.71%  -0.13%   0.82%   0.49%   0.24%   0.70%
 1967-3   0.15%  -1.04%  -0.27%   0.43%  -0.29%  -1.01%
 1971-3  -0.50%   0.25%   0.27%  -0.20%  -0.47%  -0.64%
 1975-3   0.96%  -1.60%   0.50%   0.54%   1.08%   1.48%

 Avg     -0.02%  -0.47%   0.22%   0.00%   0.27%  -0.01%

 1979-3  -1.66%   0.15%   0.29%  -0.95%   0.00%  -2.16%
 1983-3  -0.17%   0.06%  -0.57%  -0.43%   0.40%  -0.72%
 1987-3   0.46%   2.07%   0.04%  -0.26%  -0.45%   1.86%
 1991-3  -0.19%  -0.73%   0.32%   1.25%  -1.96%  -1.31%
 1995-3   0.74%  -0.08%   0.15%   0.00%   0.23%   1.04%

 Avg     -0.16%   0.30%   0.05%  -0.08%  -0.45%  -0.26%

 1999-3  -0.35%   1.14%   0.62%   0.26%  -2.18%  -0.50%
 2003-3  -0.38%   0.85%  -0.51%  -1.01%   1.43%   0.38%
 2007-3   0.26%  -0.12%   0.32%  -1.40%   0.96%   0.03%
 2011-3   0.47%   0.81%  -1.11%   0.49%  -0.81%  -0.15%
 2015-3   0.29%  -1.18%  -0.45%   0.38%   1.35%   0.39%

 Avg      0.06%   0.30%  -0.23%  -0.25%   0.15%   0.03%

SPX summary for PY3 1955 - 2015 
 Avg     -0.03%   0.03%  -0.06%  -0.14%   0.06%  -0.15%
 Win%       53%     50%     56%     50%     60%     44%

SPX summary for all years 1953 = 2018
 Avg      0.02%  -0.01%  -0.01%  -0.12%   0.04%  -0.08%
 Win%       48%     45%     53%     47%     54%     42%

Conclusion

The breadth indicators improved and the secondaries outperformed the blue chips last week. Seasonality for the coming week is mixed.

I expect the major averages to be higher on Friday, May 10 than they were on Friday, May 3. 

Last week, like the previous week, the Dow Jones Industrial Average was down a little while the other 3 major indices were up. So I am calling last weeks positive forecast a tie.