The good news is:

• Seasonality improves at the end of September.

The Negatives

The first chart covers the last 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH is following prices at a lower level.

The next chart is similar to the one above except it shows the Nasdaq composite (OTC) in blue and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH fell while prices were flat.

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them nearly binary so direction is less important than position.

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.  

NYSE SI’s are all near their lows.

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

Nasdaq SI’s are split.  The volume SI is near the top while the advance – decline and new high new low SI’s are near the bottom.

The next chart covers the last 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).  

OTC NL continued moving downward last week while prices were flat.

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.

Ditto NY NL.

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 remained at a negative value. 

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 remained modestly negative. 

The Positives

Seasonality turns positive at the end of this month.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday day of September 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 2022 while SPX data runs from 1953 to 2022.  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

Average returns for the coming week have been negative by all measures. 

Report for the week before the 4th Friday of September.

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

Daily returns from Monday through the 4th Friday.


OTC Presidential Year 3 (PY3)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1963-3  -0.06%  -0.37%  -0.34%  -0.71%  -0.49%  -1.95%

 1967-3   0.19%   0.34%   0.20%  -0.08%   0.35%   1.00%

 1971-3  -0.10%  -0.15%  -0.76%  -0.17%   0.07%  -1.11%

 1975-3  -0.69%   0.11%   0.65%  -0.43%   0.05%  -0.32%

 1979-3  -0.35%  -0.57%   0.41%   0.33%  -0.26%  -0.44%


 Avg     -0.20%  -0.13%   0.03%  -0.21%  -0.05%  -0.57%


 1983-3   2.00%  -1.45%  -0.03%   0.43%  -0.31%   0.63%

 1987-3  -1.10%   0.43%   0.64%   0.12%   0.15%   0.24%

 1991-3  -0.47%   0.34%   0.26%  -0.17%  -0.47%  -0.51%

 1995-3  -0.09%   0.96%   0.45%  -0.62%  -0.48%   0.23%

 1999-3   0.57%  -2.00%   1.32%  -2.00%  -0.34%  -2.45%


 Avg      0.18%  -0.34%   0.53%  -0.45%  -0.29%  -0.37%


 2003-3  -1.63%   1.45%  -2.00%  -1.44%  -1.39%  -5.01%

 2007-3  -0.12%   0.58%   0.58%   0.39%  -0.30%   1.13%

 2011-3  -0.36%  -0.86%  -2.00%  -2.00%   1.12%  -4.10%

 2015-3   0.04%  -1.50%  -0.08%  -0.38%  -1.01%  -2.94%

 2019-3  -0.06%  -1.46%   1.05%  -0.58%  -1.13%  -2.19%


 Avg     -0.43%  -0.36%  -0.49%  -0.80%  -0.54%  -2.62%


OTC summary for PY3 1963 - 2019 

 Avg     -0.15%  -0.28%   0.02%  -0.49%  -0.30%  -1.19%

 Win%       27%     47%     60%     27%     33%     33%


OTC summary for all years 1963 - 2022

 Avg     -0.21%  -0.11%  -0.01%  -0.25%  -0.14%  -0.72%

 Win%       40%     52%     53%     40%     47%     43%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3   0.16%  -0.07%   0.58%   0.00%   0.53%   1.19%

 1959-3  -1.46%  -0.24%   1.23%   1.72%  -0.09%   1.17%


 1963-3  -0.46%   0.47%  -0.56%  -0.85%  -0.19%  -1.60%

 1967-3   0.27%  -0.37%  -0.04%   0.64%   0.26%   0.76%

 1971-3  -0.28%  -0.34%  -0.88%  -0.09%  -0.23%  -1.82%

 1975-3  -0.94%  -0.15%   0.94%  -0.12%   0.64%   0.37%

 1979-3  -0.78%   0.06%   0.26%   0.23%  -0.81%  -1.04%


 Avg     -0.44%  -0.07%  -0.06%  -0.04%  -0.07%  -0.67%


 1983-3   0.83%   0.97%  -0.50%   0.80%  -0.15%   1.96%

 1987-3  -1.37%   2.00%   0.53%  -0.46%   0.14%   0.84%

 1991-3  -0.52%   0.46%  -0.21%  -0.10%  -0.15%  -0.52%

 1995-3  -0.10%   0.25%   0.44%  -0.64%  -0.22%  -0.27%

 1999-3   0.01%  -2.00%   0.22%  -2.00%  -0.27%  -4.03%


 Avg     -0.23%   0.34%   0.10%  -0.48%  -0.13%  -0.40%


 2003-3  -1.30%   0.61%  -1.91%  -0.61%  -0.64%  -3.85%

 2007-3  -0.53%  -0.03%   0.54%   0.39%  -0.30%   0.07%

 2011-3  -0.98%  -0.17%  -2.00%  -2.00%   0.61%  -4.54%

 2015-3   0.46%  -1.23%  -0.20%  -0.34%  -0.05%  -1.36%

 2019-3  -0.01%  -0.84%   0.62%  -0.24%  -0.53%  -1.01%


 Avg     -0.47%  -0.33%  -0.59%  -0.56%  -0.18%  -2.14%


SPX summary for PY3 1955 - 2019 

 Avg     -0.41%  -0.04%  -0.06%  -0.23%  -0.09%  -0.81%

 Win%       29%     41%     53%     31%     29%     41%


SPX summary for all years 1953 - 2022

 Avg     -0.38%  -0.07%  -0.09%  -0.17%  -0.12%  -0.82%

 Win%       31%     45%     51%     40%     41%     35%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart, made with FastTrack, covers the past 5 years showing the SPX in red and M2 money supply in green.

Money supply remained constant the past month.

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

• 2yr yield 5.037% up from 4.893%
• 5yr yield 4.463% up from 4.303%
• 10yr yield 4.331% up from 4.154% 
• 30yr yield 4.419% up from 4.261%

Everything is inverted (shorter term maturities yield more than longer term maturities) except the 30 yr, which is higher than the 10 yr.

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 started its late September seasonal sell off a day early on near record volume.

The breadth indicators all have a negative bias.

Seasonality for the next 2 weeks is negative.

The strongest sectors last week were Utilities and Precious metals (up from the bottom last week) while the weakest were Retail and Technology.

I expect the major averages to be lower on Friday, September 23 than they were on Friday, September 16. 

Last week the Dow Jones Industrial Average was up while the other major indices were down (all of the major indices moved less than 1% for the week).  I am calling last week's positive forecast a tie.

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