The good news is:

• All of the major indices closed at all time or multiyear highs on Wednesday or Friday last week.

 

The Negatives

The first chart covers the last 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 1^st trading day of each month.  

OTC NH failed to confirm the all time index high by a wide margin.  

 

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

NY NH also failed to confirm the SPX all time high.

 

The Positives

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 (equal numbers of new highs and new lows).

OTC HL Ratio moved into positive 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 rose to a very strong 87%.

 

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of Nasdaq new lows (OTC NL) in brown.  OTC NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good).  

New lows declined significantly last week and OTC NL moved up sharply .

 

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

NYSE new lows also disappeared last week and NY NL surged.

 

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them nearly binary.

The next chart covers the past 6 months showing the SPX in red and momentum of summation indices of oscillators of advancing and declining issues, new highs and new lows and upside and downside volume on the NYSE.  

NY SI MoM’s are all solidly positive.

 

The next chart is similar to the one above; except it shows the OTC, in blue and the SI MoM’s have been generated from Nasdaq breadth data. 

Ditto OTC SI MoM’s. 

 

Seasonality

Next week includes the 5 trading days prior to the 3^rd Friday of July during the 4^th 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 2023 while SPX data runs from 1953 to 2023.  There are summaries for both the 4^th 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 negative by all measures. 

 

Report for the week before the 3rd Friday of July.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday through 3rd Friday.

 

OTC Presidential Year 4 (PY4)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1964-4   0.34%  -0.15%  -0.10%   0.12%  -0.05%   0.17%

 1968-4  -0.07%  -1.00%   0.00%  -0.84%  -1.41%  -3.32%

 1972-4  -0.76%  -0.67%   0.18%  -0.53%   0.42%  -1.35%

 1976-4   0.50%   0.03%   0.51%   0.09%  -0.13%   1.00%

 1980-4   0.29%  -0.40%   0.02%   0.06%  -0.17%  -0.21%


 Avg      0.06%  -0.44%   0.15%  -0.22%  -0.27%  -0.74%


 1984-4  -0.42%  -0.08%  -0.54%  -0.58%  -0.66%  -2.28%

 1988-4  -0.05%  -0.16%   0.01%   0.28%  -0.02%   0.07%

 1992-4  -1.09%   0.77%  -0.84%   0.24%   0.07%  -0.85%

 1996-4  -3.92%  -0.63%   3.15%   2.13%  -1.09%  -0.37%

 2000-4   0.67%  -2.28%  -2.91%   3.18%  -2.15%  -3.49%


 Avg     -0.96%  -0.48%  -0.23%   1.05%  -0.77%  -1.39%


 2004-4  -0.48%  -0.27%  -0.87%  -0.11%  -1.55%  -3.28%

 2008-4  -0.14%   1.07%   0.95%  -1.97%   1.33%   1.25%

 2012-4  -0.40%   0.45%   1.12%   0.79%  -1.37%   0.60%

 2016-4   0.64%   0.69%  -0.34%   0.57%  -0.09%   1.47%

 2020-4   2.51%  -0.81%   0.24%  -2.29%  -0.94%  -1.28%


 Avg      0.43%   0.23%   0.22%  -0.60%  -0.52%  -0.25%


OTC summary for PY4 1964 - 2020 

 Avg     -0.16%  -0.23%   0.04%   0.08%  -0.52%  -0.79%

 Win%       40%     33%     57%     60%     20%     40%


OTC summary for all years 1963 - 2023

 Avg     -0.06%  -0.11%   0.02%  -0.05%  -0.19%  -0.38%

 Win%       58%     39%     50%     55%     41%     41%


SPX PY4

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1956-4   0.86%   0.35%  -0.02%   0.04%   0.06%   1.29%

 1960-4  -0.89%  -1.09%  -0.27%   0.04%  -0.12%  -2.33%


 1964-4  -0.32%  -0.24%  -0.02%  -0.05%  -0.02%  -0.66%

 1968-4  -1.12%  -0.12%   0.00%  -1.28%   0.41%  -2.12%

 1972-4  -0.86%  -0.05%   0.29%  -0.31%   0.80%  -0.12%

 1976-4   0.88%  -0.22%   0.26%  -0.71%  -0.49%  -0.28%

 1980-4   0.39%  -0.26%  -0.21%  -0.11%  -0.83%  -1.03%


 Avg     -0.21%  -0.18%   0.08%  -0.49%  -0.03%  -0.84%


 1984-4   0.48%   0.51%  -0.64%  -0.68%  -0.55%  -0.88%

 1988-4   0.20%  -1.00%   0.55%   0.35%   0.66%   0.76%

 1992-4  -0.45%   0.00%  -0.68%   0.28%  -0.12%  -0.97%

 1996-4  -2.53%  -0.23%   0.91%   1.50%  -0.75%  -1.11%

 2000-4   0.03%  -1.11%  -0.78%   0.92%  -1.03%  -1.97%


 Avg     -0.46%  -0.36%  -0.13%   0.47%  -0.36%  -0.83%


 2004-4   0.14%   0.07%  -0.33%  -0.43%  -0.48%  -1.03%

 2008-4  -0.05%   1.35%   0.41%  -2.31%   0.42%  -0.19%

 2012-4  -0.23%   0.74%   0.67%   0.27%  -1.01%   0.44%

 2016-4   0.34%   0.70%   0.01%   0.53%  -0.09%   1.49%

 2020-4   0.84%   0.17%   0.57%  -1.23%  -0.62%  -0.27%


 Avg      0.21%   0.61%   0.27%  -0.64%  -0.36%   0.09%


SPX summary for PY4 (1956 - 2020) 

 Avg     -0.14%  -0.02%   0.04%  -0.19%  -0.22%  -0.53%

 Win%       53%     47%     50%     47%     29%     24%


SPX summary for all years 1953 - 2023

 Avg     -0.09%  -0.18%   0.04%  -0.04%  -0.12%  -0.38%

 Win%       49%     36%     54%     54%     46%     41%

 

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart, made with FastTrack, covers the past 4 years showing the SPX in red and M2 money supply in green.

Money supply has remained constant for nearly a year.

 

Treasury rates at their close last Friday and their changes from last month:

2yr yield 4.464% down from 4.715%

5yr yield 4.106% down from 4.247%

10yr yield 4.187% down from 4.228% 

30yr yield 4.397% up from 4.350%

All rates, except the 30yr declined from their levels of last month.

All the rates are inverted (shorter term maturities yield more than longer term maturities) relative to the 2 year.

 

The next chart covers the past 15 months showing the 30 year yield over the 5 year yield on top, The 1, 2, 5, 10 & 30 year treasury rates in the middle group and the SPX with a 50 day simple moving average on the bottom.

 

Conclusion

The market had a good week last week.

Breadth broadened and the mid and small cap indices were stronger than the blue chips.

Seasonality for the coming week has been negative.

The strongest sectors last week were Precious Metals (for the 2^nd week) and Telecomm while the weakest were Leisure and and Energy.

I expect the major averages to be lower on Friday July 19 than they were on Friday July 12. 

 

 

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