The good news is:

• Seasonality is positive for next week.

The Negatives

Summation indices are running totals of oscillator values.

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

The first 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 NYSE.  Dashed vertical lines have been drawn on the 1st trading day of each month.

NYSE SI’s all moved downward last week.

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 data.  

All of Nasdaq SI’s are at the bottom or heading there. 

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 slowly downward last 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 turned downward last week.

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 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 fell into negative territory last week. 

The Positives

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 tumbled, but remained in comfortably positive territory. 

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 fell along with prices after confirming a recent high.

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 fell sharply after confirming the mid July index high.

Seasonality

Next week includes the 5 trading days prior to the 2nd 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 positive by all measures and stronger during the 3rd year of the Presidential Cycle than other years. 

Report for the week before the 2nd Friday of August.

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

Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3 (PY3)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1963-3   0.24%   0.33%   0.41%   0.03%   0.50%   1.51%

 1967-3   0.05%   0.23%   0.50%   0.72%  -0.13%   1.36%

 1971-3  -0.58%  -0.14%   1.01%   1.09%   0.22%   1.60%

 1975-3  -1.03%  -1.00%   0.09%  -0.81%  -0.05%  -2.80%

 1979-3  -0.15%   0.62%   0.53%   0.15%   0.55%   1.70%


 Avg     -0.29%   0.01%   0.51%   0.23%   0.22%   0.67%


 1983-3  -1.76%  -0.23%   0.81%   0.31%   0.68%  -0.18%

 1987-3   0.61%   0.69%  -0.03%   0.52%   0.01%   1.80%

 1991-3  -0.61%   0.52%   0.45%   0.38%  -0.21%   0.53%

 1995-3   0.42%   0.19%   0.80%  -0.45%   0.35%   1.31%

 1999-3  -1.14%  -1.15%   3.01%  -0.60%   3.46%   3.58%


 Avg     -0.50%   0.00%   1.01%   0.03%   0.86%   1.41%


 2003-3  -0.09%  -2.37%  -1.24%  -0.03%  -0.49%  -4.22%

 2007-3   1.44%   0.56%   2.01%  -2.16%  -0.45%   1.39%

 2011-3  -6.90%   5.29%  -4.09%   4.69%   0.61%  -0.39%

 2015-3   1.16%  -1.27%   0.15%  -0.21%   0.29%   0.11%

 2019-3  -3.47%   1.39%   0.38%   2.24%  -1.00%  -0.46%


 Avg     -1.57%   0.72%  -0.56%   0.90%  -0.21%  -0.72%


OTC summary for PY3 1963 - 2019 

 Avg     -0.79%   0.24%   0.32%   0.39%   0.29%   0.46%

 Win%       40%     60%     80%     60%     60%     67%


OTC summary for all years 1963 - 2022

 Avg     -0.31%   0.09%   0.19%   0.07%   0.05%   0.09%

 Win%       45%     52%     61%     63%     50%     58%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3  -0.59%  -1.32%  -0.02%   0.93%   0.19%  -0.81%

 1959-3  -2.09%   1.31%  -0.24%  -0.17%   0.24%  -0.94%


 1963-3   0.59%   0.66%  -0.30%   0.09%   0.66%   1.69%

 1967-3  -0.26%   0.12%   0.09%  -0.26%  -0.40%  -0.71%

 1971-3  -0.76%   0.01%   1.20%   1.42%  -0.32%   1.54%

 1975-3  -0.95%  -1.06%   0.02%   0.06%  -0.32%  -2.25%

 1979-3   0.25%   1.29%   0.31%  -0.46%   0.86%   2.26%


 Avg     -0.23%   0.20%   0.27%   0.17%   0.09%   0.50%


 1983-3  -1.58%   0.60%   0.88%   0.01%   0.38%   0.28%

 1987-3   1.55%   1.62%  -0.28%   0.68%  -0.20%   3.37%

 1991-3  -0.55%   1.44%  -0.02%  -0.32%  -0.57%   0.00%

 1995-3   0.20%   0.06%  -0.12%  -0.40%  -0.42%  -0.69%

 1999-3  -0.19%  -1.26%   1.61%  -0.29%   2.27%   2.13%


 Avg     -0.12%   0.49%   0.41%  -0.07%   0.29%   1.02%


 2003-3   0.27%  -1.77%   0.17%   0.73%   0.36%  -0.24%

 2007-3   2.42%   0.62%   1.41%  -2.96%   0.04%   1.51%

 2011-3  -6.66%   4.74%  -4.42%   4.63%   0.53%  -1.18%

 2015-3   1.28%  -0.96%   0.10%  -0.13%   0.39%   0.68%

 2019-3  -2.98%   1.30%   0.08%   1.88%  -0.66%  -0.38%


 Avg     -1.13%   0.79%  -0.53%   0.83%   0.13%   0.08%


SPX summary for PY3 1955 - 2019 

 Avg     -0.59%   0.44%   0.03%   0.32%   0.18%   0.37%

 Win%       41%     71%     59%     53%     59%     47%


SPX summary for all years 1953 - 2022

 Avg     -0.29%   0.16%   0.11%   0.07%   0.07%   0.13%

 Win%       41%     59%     55%     49%     53%     57%

Conclusion

The market is no longer overbought.  

The breadth indicators all headed downward, but the numbers were not terrible.

Seasonality is positive for the coming week.

The strongest sectors last week were Energy and Banks (both for the 2nd week in a row) while the weakest were Precious metals (for the 2nd week) and Utilities.

I expect the major averages to be higher on Friday August 11 than they were on Friday August 4. 

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