The good news is August, during the 4th year of the Presidential Cycle, has historically been the best month of the year.

The Negatives

Leadership is narrow; there have been very few new highs considering the indices are near their all time highs.

The first chart covers the past 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 of the first trading day of each month.

The OTC missed closing at a new all time high by a hair and missed being unconfirmed (both short and intermediate term) by OTC NH.

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

NY NH performance has been pitiful.

The Positives

The number of new lows has remained insignificant.

The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue.Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio declined a little, but finished the week at a very strong 86%. 

The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red has been calculated with Nasdaq data.

OTC HL Ratio rose a little to a strong 82%.

Seasonality

Next week includes the first five trading days of August during the fourth 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 2019 while SPX data runs from 1928 to 2019.vThere are summaries for both the fourth year of the Presidential Cycle and all years combined. 

Returns for next week, during the fourth year of the Presidential Cycle have been sensational; other years, not so much.

Report for the first five days of August

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 4 (PY4)

               Day1 Day2 Day3 Day4 Day5 Totals

 1964-4 0.05% 1-0.29% 2-1.24% 3 0.22% 4-0.84% 5-2.10%

 1968-4-0.32% 4-0.19% 5-0.97% 1 0.40% 2 0.42% 4-0.66%

 1972-4 0.55% 2 0.73% 3 0.71% 4 0.48% 5 0.02% 1 2.50%

 1976-4-0.02% 1 0.81% 2-0.15% 3-0.42% 4 0.17% 5 0.39%

 1980-4 0.40% 5-0.35% 1 0.37% 2 0.54% 3 1.03% 4 1.99%

 1984-4 1.59% 3 2.37% 4 3.09% 5 1.23% 1-0.07% 2 8.20%

 1988-4 0.17% 1-0.05% 2 0.19% 3 0.09% 4-0.30% 5 0.10%

 1992-4 0.26% 1-0.18% 2-0.77% 3-0.49% 4-0.05% 5-1.22%

 1996-4 1.68% 4 2.38% 5-0.39% 1 0.75% 2 1.08% 3 5.50%

 Avg0.82% 0.83% 0.50% 0.42% 0.34% 2.91%

 2000-4-2.16% 2-0.73% 3 2.77% 4 0.73% 5 2.00% 1 2.60%

 2004-4 0.25% 1-1.73% 2-0.23% 3-1.80% 4-2.46% 5-5.97%

 2008-4-0.63% 5-1.10% 1 2.81% 2 1.21% 3-0.95% 4 1.35%

 2012-4-0.66% 3-0.36% 4 2.00% 5 0.74% 1 0.87% 2 2.59%

 2016-4 0.43% 1-0.90% 2 0.43% 3 0.13% 4 1.06% 5 1.15%

 Avg -0.55%-0.96% 1.56% 0.20% 0.10% 0.34%

OTC summary for PY4 1964 - 2016

Averages0.11% 0.03% 0.61% 0.27% 0.14% 1.17%

% Winners 64% 29% 57% 79% 57% 71%

MDD8/6/20046.09% --8/2/20002.88% --8/7/19642.14%

OTC summary for all years 1963 - 2019

Averages -0.02%-0.17%-0.12% 0.02% 0.15%-0.14%

% Winners 54% 39% 51% 65% 60% 53%

MDD 8/5/20029.20% --8/6/19908.72% --8/5/20118.13%

SPX PY4

               Day1 Day2 Day3 Day4 Day5 Totals

 1928-4-0.05% 3-0.46% 4 0.16% 5 0.26% 6 0.88% 1 0.77%

 1932-4 0.16% 1-3.93% 2 8.86% 3 2.03% 4 4.29% 511.42%

 1936-4 0.13% 6 0.25% 1-0.25% 2-0.63% 3 0.63% 4 0.13%

 1940-4-0.29% 4-0.10% 5 0.29% 6 0.00% 1-1.07% 2-1.17%

 1944-4 0.55% 2 0.23% 3-0.62% 4-0.94% 5 0.24% 6-0.54%

 1948-4 0.00% 1 0.32% 2 1.57% 3-0.37% 4 0.19% 5 1.70%

 1952-4 0.20% 5-0.08% 1 0.12% 2-0.08% 3 0.31% 4 0.47%

 1956-4 0.06% 3 0.65% 4-0.20% 5-1.57% 1 0.61% 2-0.45%

 Avg0.10% 0.20% 0.23%-0.59% 0.06% 0.00%

 1960-4 0.04% 1-0.88% 2-0.58% 3 0.31% 4 1.00% 5-0.12%

 1964-4-0.22% 1-1.25% 2 0.16% 3-0.91% 4 0.64% 5-1.59%

 1968-4-0.47% 4-0.67% 5 0.23% 1 0.41% 2-0.22% 4-0.71%

 1972-4 0.94% 2 0.82% 3 0.78% 4 0.26% 5 0.16% 1 2.97%

 1976-4-0.24% 1 0.92% 2 0.28% 3-0.56% 4-0.06% 5 0.34%

 Avg0.01%-0.21% 0.17%-0.10% 0.31% 0.18%

 1980-4-0.38% 5-0.19% 1-0.20% 2 0.67% 3 1.44% 4 1.34%

 1984-4 2.27% 3 2.54% 4 2.76% 5 0.15% 1 0.07% 2 7.79%

 1988-4 0.07% 1-0.06% 2 0.34% 3-0.38% 4-0.29% 5-0.32%

 1992-4 0.21% 1-0.17% 2-0.51% 3-0.38% 4-0.41% 5-1.26%

 1996-4 1.58% 4 1.92% 5-0.34% 1 0.33% 2 0.27% 3 3.75%

 Avg0.75% 0.81% 0.41% 0.08% 0.22% 2.26%

 2000-4 0.51% 2 0.04% 3 0.96% 4 0.71% 5 1.12% 1 3.35%

 2004-4 0.44% 1-0.63% 2-0.10% 3-1.63% 4-1.55% 5-3.46%

 2008-4-0.56% 5-0.90% 1 2.87% 2 0.34% 3-1.79% 4-0.04%

 2012-4-0.29% 3-0.75% 4 1.90% 5 0.23% 1 0.51% 2 1.61%

 2016-4-0.13% 1-0.64% 2 0.31% 3 0.02% 4 0.86% 5 0.43%

 Avg0.00%-0.57% 1.19%-0.07%-0.17% 0.38%

SPX summary for PY4 1928 - 2016

Averages0.20%-0.13% 0.82%-0.07% 0.34% 1.15%

% Winners 57% 39% 65% 52% 70% 57%

MDD8/2/19323.93% --8/6/20043.85% --8/6/19642.21%

SPX summary for all years 1928 - 2019

Averages 0.09%-0.04% 0.09%-0.14% 0.14% 0.14%

% Winners 52% 49% 52% 49% 55% 49%

MDD 8/5/20028.45% --8/5/20117.19% --8/6/19906.10%

August

August, during the fourth year of the Presidential Cycle, has been, on average, the strongest month of the year.

Since 1963, over all years, the OTC in August has been up 60% of the time with an average gain of 0.3%. During the fourth year of the Presidential Cycle August has been up 71% time with an average gain of 2.5%. The best August ever for the OTC was 2000 (+11.7%), the worst 1998 (-19.9%).

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 of the OTC in August over all years since 1963 while the green line shows the average during the fourth year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 59% of the time in August with an average gain of 0.6%. During the 4th year of the Presidential Cycle the SPX has been up 70% of the time with an average gain of 2.9%. The best August for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).

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

Since 1979 the Russell 2000 (R2K) has been up 56% of the time in August with an average gain of 0.2%. During the fourth year of the Presidential Cycle the R2K has been up 70% of the time with an average gain of 3.3%. The best August ever for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in August in magenta and the performance during the fourth year of the Presidential Cycle in green.

Since 1885 the DJIA has been up 64% of the time in August with an average gain of 1.2%. During the fourth year of the Presidential Cycle the DJIA has been up 67% of the time in August with an average gain of 2.5%. The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in August in grey and the performance during the fourth year of the Presidential Cycle in green.

Conclusion

Few new lows, free money and an attentive Plunge Protection Team (PPT) AKA Presidents Working Group on Financial Markets doing everything possible (legal or not) to keep prices of everything up. 

The strongest sectors last week were precious metals and tech; the weakest were energy and banks. Banks and Tech switched places from the week before.  

I expect the major averages to be higher on Friday, August 7, than they were on Friday, July 31. In the PPT I trust.

Last week last week the DJIA was down a little while everything else was up so I am calling last week's positive forecast a tie.