The good news is:

• The Nasdaq composite (OTC) closed at its high for this year.

The Negatives

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 first 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 (equal numbers of new highs and new lows).

OTC HL Ratio declined last week while the index moved up to its high for the year. 

The next chart is similar to the first one except it shows the S&P 500 (SPX) in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL ratio fell into negative territory.  

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 was down for the week.

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.

NY NL also declined last week.

Summation indices are running totals of oscillator values.

Short term momentum indicators make them binary so position is all that matters.

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

All the Nasdaq SI’s momentum went negative last week. 

The next chart is similar to the one above, except it shows the SPX as the index and the SI’s have been generated from NYSE data.  

All the NYSE SI’s momentum indicators also went negative last week.

The Positives

Seasonality for the coming week has been modestly positive. 

Seasonality

Next week includes the first 5 trading days 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 2022 while SPX data runs from 1928 to 2022.  There are summaries for both the 3rd year of the Presidential Cycle and all years combined.  

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

Report for the first 5 days of May.

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)

               Day1      Day2      Day3      Day4      Day5      Totals

 1963-3       0.73% 3  -0.12% 4   0.39% 5  -0.45% 1  -0.51% 2     0.04%

 1967-3       0.85% 1   0.41% 2   0.31% 3   1.45% 4   1.50% 5     4.52%

 1971-3      -0.85% 1   0.38% 2  -0.08% 3  -0.56% 4  -0.36% 5    -1.46%

 1975-3       0.93% 4   1.24% 5   1.11% 1  -0.41% 2   1.24% 3     4.11%

 1979-3      -0.02% 2   0.15% 3   0.16% 4  -0.36% 5  -2.33% 1    -2.41%


 Avg          0.33%     0.41%     0.38%    -0.06%    -0.09%       0.96%


 1983-3      -0.86% 1  -0.31% 2   1.23% 3   1.40% 4   1.45% 5     2.92%

 1987-3       0.15% 5   0.00% 1   0.95% 2  -0.01% 3   0.06% 4     1.15%

 1991-3       0.65% 3   0.67% 4   0.20% 5  -0.13% 1   0.01% 2     1.40%

 1995-3      -0.28% 1   0.02% 2   1.01% 3  -0.41% 4  -0.38% 5    -0.05%

 1999-3      -0.29% 1  -1.99% 2   1.98% 3  -2.41% 4   1.23% 5    -1.48%


 Avg         -0.13%    -0.32%     1.07%    -0.31%     0.47%       0.79%


 2003-3       0.56% 4   2.06% 5   0.08% 1   1.31% 2  -1.11% 3     2.89%

 2007-3       0.26% 2   1.04% 3   0.30% 4   0.26% 5  -0.05% 1     1.81%

 2011-3      -0.33% 1  -0.78% 2  -0.47% 3  -0.48% 4   0.46% 5    -1.61%

 2015-3       1.29% 5   0.23% 1  -1.55% 2  -0.40% 3   0.53% 4     0.11%

 2019-3      -0.57% 3  -0.16% 4   1.58% 5  -0.50% 1  -1.96% 2    -1.60%


 Avg          0.24%     0.48%    -0.01%     0.04%    -0.43%       0.32%


OTC summary for PY3 1963 - 2019

Averages      0.15%     0.19%     0.48%    -0.11%    -0.02%       0.69%

% Winners       53%       67%       80%       27%       53%         60%

MDD  5/6/1999  2.74% --  5/7/1979  2.68% --  5/7/2019  2.45%


OTC summary for all years 1963 - 2022

Averages      0.28%     0.12%     0.10%    -0.12%    -0.07%       0.32%

% Winners       63%       67%       58%       55%       57%         60%

MDD 5/7/2010  9.33% --  5/7/2002  6.78% --  5/3/2000  6.34%


SPX PY3

               Day1      Day2      Day3      Day4      Day5      Totals

 1931-3      -2.92% 5   1.16% 6   1.62% 1  -0.80% 2   0.47% 3    -0.46%

 1935-3      -0.54% 3   0.43% 4   1.62% 5   0.85% 6  -0.84% 1     1.52%

 1939-3      -0.55% 1   1.29% 2   2.64% 3  -0.35% 4  -0.36% 5     2.67%


 1943-3       0.52% 6   1.46% 1   0.34% 2   0.59% 3   0.34% 4     3.24%

 1947-3       0.75% 4   0.68% 5   0.34% 6   0.07% 1  -1.08% 2     0.76%

 1951-3       0.45% 2   0.40% 3   0.84% 4  -0.18% 5  -0.35% 6     1.16%

 1955-3       0.21% 1  -0.89% 2  -0.16% 3   0.48% 4   0.19% 5    -0.18%

 1959-3       0.10% 5   0.00% 1   0.17% 2  -0.24% 3  -1.27% 4    -1.23%


 Avg          0.41%     0.33%     0.31%     0.14%    -0.44%       0.75%


 1963-3       0.24% 3   0.29% 4  -0.20% 5  -0.71% 1  -0.13% 2    -0.51%

 1967-3      -0.18% 1  -0.18% 2   0.26% 3   0.44% 4   0.13% 5     0.46%

 1971-3      -0.63% 1   0.48% 2  -0.01% 3  -0.53% 4  -0.35% 5    -1.04%

 1975-3       0.92% 4   1.27% 5   0.96% 1  -1.60% 2   0.50% 3     2.05%

 1979-3      -0.08% 2   0.04% 3   0.09% 4  -1.10% 5  -1.66% 1    -2.71%


 Avg          0.05%     0.38%     0.22%    -0.70%    -0.30%      -0.35%


 1983-3      -1.40% 1   0.14% 2   0.60% 3   0.59% 4   1.11% 5     1.04%

 1987-3      -0.11% 5   0.46% 1   2.07% 2   0.04% 3  -0.26% 4     2.20%

 1991-3       1.32% 3   0.06% 4   0.07% 5  -0.19% 1  -0.73% 2     0.53%

 1995-3      -0.09% 1   0.12% 2   1.09% 3   0.01% 4  -0.08% 5     1.05%

 1999-3       1.46% 1  -1.68% 2   1.15% 3  -1.13% 4   0.97% 5     0.77%


 Avg          0.23%    -0.18%     1.00%    -0.13%     0.20%       1.12%


 2003-3      -0.07% 4   1.50% 5  -0.38% 1   0.85% 2  -0.51% 3     1.39%

 2007-3       0.27% 2   0.65% 3   0.43% 4   0.21% 5   0.26% 1     1.82%

 2011-3      -0.18% 1  -0.34% 2  -0.69% 3  -0.91% 4   0.37% 5    -1.74%

 2015-3       1.09% 5   0.29% 1  -1.18% 2  -0.45% 3   0.38% 4     0.13%

 2019-3      -0.75% 3  -0.21% 4   0.96% 5  -0.45% 1  -1.65% 2    -2.10%


 Avg          0.07%     0.38%    -0.17%    -0.15%    -0.23%      -0.10%


SPX summary for PY3 1931 - 2019

Averages     -0.01%     0.32%     0.55%    -0.20%    -0.20%       0.47%

% Winners       48%       74%       74%       43%       43%         65%

MDD  5/1/1931  2.92% --  5/7/1979  2.74% --  5/7/2019  2.10%


SPX summary for all years 1928 - 2022

Averages      0.09%     0.15%     0.23%    -0.08%     0.13%       0.51%

% Winners       56%       67%       63%       44%       51%         65%

MDD 5/3/1930  8.27% --  5/7/2010  7.60% --  5/6/2022  4.11%

May

Since 1963, over all years the OTC in May has been up 60% of the time with an average gain of 0.6%.  During the 3rd year of the Presidential Cycle May has been up 60% time with an average gain of 1.3%.  The worst May ever, 1970 (-13.0%), the best 1997 (+11.1%)

The average month has 21 trading days.  The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10.  In months when there were more than 21 trading days some of the days in the middle were not counted.  In months when there were less than 21 trading days some of the days in the middle of the month were counted twice.  Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that.  The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in May over all years since 1963 while the black line shows the average daily performance during the 3rd year of the Presidential Cycle.

Since 1928 the SPX has been up 59% of the time in May with an average loss of -0.1% (helped by a loss of -23.3% in 1932 and -24.0% in 1940).  During the 3rd year of the Presidential Cycle the SPX has been up 52% of the time with an average loss of -0.1%.  The best ever May for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%). 

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in May in red and the average daily performance during the 3rd year of the Presidential Cycle in black.

Since 1979 the Russell 2000 (R2K) has been up 64% of the time in May with an average gain of 1.2%.  During the 3rd year of the Presidential Cycle the R2K has been up 64% of the time with an average gain of 1.7%.  The best ever May for the R2K, 1997 (+11.0%), the worst 2019 (-7.9%)

The chart below is similar to those above except it shows the average daily performance over all years of the R2K in May in magenta and the average daily performance during the 3rd year of the Presidential Cycle in black.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 53% of the time in May with an average loss of -0.1%.  During the 3rd year of the Presidential Cycle the DJIA has been up 50% of the time with an average loss of -0.6%.  The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

The chart below is similar to those above except it shows the average daily performance over all years of the DJIA in May in grey and the average daily performance during the 3rd year of the Presidential Cycle in black.

Conclusion

The market ceased to be boring last week.  Prices were mostly up on lousy breadth.

The strongest sectors last week were Leisure and Finance care while the weakest were Energy (for the 2nd week in a row) and Electronics.

I expect the major averages to be lower on Friday, May 5 than they were on Friday, April 28.

Last week all of the major indices were up except the R2K so I am calling last week's positive forecast a tie.

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