Technical Market Report For August 19, 2023
The good news is:
- Seasonality has been pretty good for the coming week.
The Negatives
Summation indices are running totals of oscillator values.
Short term momentum indicators applied to summation indices make them binary so direction is less important than position.
The first chart covers the past 6 months showing the S&P 500 (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. Dashed vertical lines have been drawn on the 1st trading day of each month.
NYSE SI’s remained at the bottom of the chart last week.
The next chart is similar to the one above, except it shows the Nasdaq composite (OTC), in blue, as the index and the SI’s have been generated from Nasdaq data.
Ditto Nasdaq SI’s.
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 its sharp downward fall.
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 fell deeper into negative territory 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 fell into negative territory.
The Positives
The market is oversold.
The next chart covers the last 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.
NY NH confirmed the recent high. That confirmation implies there should be another higher high for the SPX in the next couple months.
The next chart is similar to the one above except it shows the OTC in blue and OTC NH, in green, has been calculated with Nasdaq data.
OTC NH Ditto the OTC.
Seasonality
Next week includes the 5 trading days prior to the 4th Friday of August 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 mixed, modest and stronger during the 3rd year of the Presidential Cycle than other years.
Report for the week before the 4th Friday of August. 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 0.26% -0.14% -0.06% 0.06% 0.58% 0.69% 1967-3 -0.02% 0.10% -0.11% -0.34% -0.23% -0.61% 1971-3 0.34% 0.31% 0.23% 0.11% 0.30% 1.30% 1975-3 -0.70% -1.77% -1.47% 0.50% 0.72% -2.71% 1979-3 0.07% 0.03% 0.51% 0.26% 0.18% 1.05% Avg -0.01% -0.29% -0.18% 0.12% 0.31% -0.06% 1983-3 -0.11% -1.71% -0.95% -0.46% 0.27% -2.96% 1987-3 -0.31% 0.29% 0.04% -0.10% -0.33% -0.42% 1991-3 -2.89% 0.89% 3.17% 0.06% 0.53% 1.76% 1995-3 -1.12% 0.55% 0.28% -0.71% -0.09% -1.09% 1999-3 2.69% 1.21% 1.93% -1.10% -0.57% 4.16% Avg -0.35% 0.24% 0.89% -0.46% -0.04% 0.29% 2003-3 2.20% 1.24% -0.03% 0.97% -0.69% 3.69% 2007-3 0.14% 0.51% 1.25% -0.43% 1.38% 2.84% 2011-3 0.15% 4.29% 0.88% -1.95% 2.49% 5.87% 2015-3 -3.82% -0.44% 4.24% 2.45% 0.32% 2.76% 2019-3 1.35% -0.68% 0.90% -0.36% -3.00% -1.78% Avg 0.01% 0.99% 1.45% 0.14% 0.10% 2.68% OTC summary for PY3 1963 - 2019 Avg -0.12% 0.31% 0.72% -0.07% 0.12% 0.97% Win% 53% 67% 67% 47% 60% 60% OTC summary for all years 1963 - 2022 Avg -0.13% 0.07% 0.40% -0.09% 0.12% 0.35% Win% 43% 57% 67% 48% 63% 60% SPX PY3 Year Mon Tue Wed Thur Fri Totals 1955-3 -0.10% 1.36% 0.14% 0.45% 0.44% 2.29% 1959-3 -0.36% 0.20% 0.14% 0.96% -0.25% 0.70% 1963-3 -0.07% -0.08% -0.13% 0.35% 0.31% 0.38% 1967-3 -0.56% -0.54% -0.14% -0.56% -0.42% -2.21% 1971-3 1.03% 1.07% 0.01% -0.17% 0.24% 2.17% 1975-3 -0.19% -1.45% -2.04% -0.18% 1.46% -2.40% 1979-3 0.49% 0.07% 0.07% -0.33% -0.03% 0.28% Avg 0.14% -0.19% -0.44% -0.18% 0.31% -0.36% 1983-3 0.22% -0.96% -0.93% -0.25% 0.81% -1.12% 1987-3 -0.77% 1.03% -0.65% -0.95% -1.31% -2.65% 1991-3 -2.36% 0.79% 2.94% 0.19% 0.73% 2.28% 1995-3 -0.20% 0.25% -0.43% 0.06% 0.47% 0.16% 1999-3 1.77% 0.24% 1.34% -1.43% -1.01% 0.91% Avg -0.27% 0.27% 0.45% -0.48% -0.06% -0.08% 2003-3 0.92% 0.26% -0.20% 0.30% -1.02% 0.25% 2007-3 -0.03% 0.11% 1.17% -0.11% 1.15% 2.30% 2011-3 0.03% 3.43% 1.31% -1.56% 1.51% 4.72% 2015-3 -3.94% -1.35% 3.90% 2.43% 0.06% 1.10% 2019-3 1.21% -0.79% 0.82% -0.05% -2.59% -1.40% Avg -0.36% 0.33% 1.40% 0.20% -0.18% 1.39% SPX summary for PY3 1955 - 2019 Avg -0.17% 0.21% 0.43% -0.05% 0.03% 0.46% Win% 41% 65% 59% 41% 59% 71% SPX summary for all years 1953 - 2022 Avg -0.16% 0.04% 0.25% -0.12% -0.02% -0.01% Win% 44% 57% 60% 46% 51% 60%
Conclusion
The breadth indicators are all headed downward.
Seasonality is modestly positive for the coming week.
The strongest sectors last week were Energy (for the 4th week) and Telecomm while the weakest were Transportation and Electronics (both for the 2nd consecutive week).
I expect the major averages to be lower on Friday August 25 than they were on Friday August 18.
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