The good news is:

• This period of weakness cannot go on forever.

 

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 1^st trading day of each month.  

NY NH continued its decline.

The next chart is similar to the 1^st one except it shows the NASDAQ composite (OTC) in blue and OTC NH in green has been calculated with NASDAQ data.  

OTC NH OTC NH also continued its decline.

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 (equal numbers of new highs and new lows).

NY HL ratio turned downward remaining in deeply negative territory. 

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 returned to negative territory last week.

The next chart covers the past 6 months showing the NASDAQ composite (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 turned downward.

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.

 

The Positives

The positives are illusive.

 

Seasonality

Next week includes the 5 trading days prior to the 3^rd Friday of January during the 1^st 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 2024 while SPX data runs from 1953 to 2024.  There are summaries for both the 1^st 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. 

Seasonally next week has been modestly positive.

 

Report for the week before the 3rd Friday of January.

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

Daily returns from Monday through 3rd Friday.

OTC Presidential Year 1 (PY1)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1965-1   0.26%   0.20%   0.09%   0.09%   0.07%   0.70%

 1969-1  -0.76%  -0.74%  -0.16%   0.65%   1.11%   0.10%

 1973-1  -0.61%  -1.04%  -0.42%   0.03%  -0.15%  -2.19%

 1977-1  -0.06%  -0.01%   0.43%  -0.48%   0.25%   0.13%

 1981-1   0.39%  -0.20%   0.52%   0.39%   0.64%   1.75%

 

 Avg     -0.15%  -0.36%   0.09%   0.13%   0.38%   0.10%

 

 1985-1   1.28%   0.93%   0.95%   0.35%   0.72%   4.25%

 1989-1   0.07%  -0.34%   0.73%   0.57%   0.15%   1.18%

 1993-1   0.14%  -0.19%   0.09%   0.48%   0.12%   0.64%

 1997-1  -0.08%   1.11%  -0.89%   0.51%   0.64%   1.29%

 2001-1   0.00%  -0.30%   2.45%   3.19%   0.07%   5.41%

 

 Avg      0.35%   0.24%   0.67%   1.02%   0.34%   2.55%o

 

 2005-1   0.00%   0.87%  -1.54%  -1.34%  -0.57%  -2.58%

 2009-1  -2.09%   0.50%  -3.67%   1.49%   1.16%  -2.62%

 2013-1  -0.26%  -0.22%   0.22%   0.59%  -0.04%   0.29%

 2017-1   0.00%  -0.63%   0.31%  -0.28%   0.28%  -0.33%

 2021-1   0.00%   1.53%   1.97%   0.55%   0.09%   4.14%

 

 Avg     -1.17%   0.41%  -0.54%   0.20%   0.18%  -0.22%

 

OTC summary for PY1 1965 - 2021

 Avg     -0.15%   0.10%   0.07%   0.45%   0.30%   0.81%

 Win%       45%     40%     67%     80%     80%     73%

 

OTC summary for all years 1963 - 2024

 Avg     -0.03%   0.20%   0.04%   0.20%   0.11%   0.53%

 Win%       58%     56%     58%     65%     61%     69%

 

SPX PY1

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1953-1  -0.84%   0.62%   0.23%   0.19%  -0.42%  -0.22%

 1957-1  -0.69%  -1.48%   0.11%  -0.02%  -1.28%  -3.37%

 1961-1  -0.03%  -0.40%   0.57%   0.15%   0.32%   0.61%

 

 1965-1   0.32%   0.16%  -0.03%  -0.09%   0.25%   0.61%

 1969-1  -0.53%   0.73%   0.48%   0.55%  -0.15%   1.09%

 1973-1  -0.72%  -0.25%   0.46%   0.14%  -0.06%  -0.43%

 1977-1  -0.27%  -0.40%   0.51%  -0.85%   0.34%  -0.66%

 1981-1   0.03%  -0.17%   0.14%   0.64%   0.34%   0.96%

 

 Avg     -0.23%   0.01%   0.31%   0.08%   0.14%   0.32%

 

 1985-1   1.55%   0.18%   0.22%  -0.27%   0.35%   2.02%

 1989-1   0.10%  -0.21%   1.05%   0.13%  -0.09%   0.97%

 1993-1  -0.07%  -0.39%  -0.40%   0.49%   0.14%  -0.24%

 1997-1   0.00%   1.23%  -0.22%   0.33%   0.83%   2.18%

 2001-1   0.00%   0.63%   0.21%   1.39%  -0.40%   1.83%

 

 Avg      0.39%   0.29%   0.17%   0.41%   0.16%   1.36%

 

 2005-1   0.00%   0.97%  -0.95%  -0.78%  -0.64%  -1.40%

 2009-1  -2.26%   0.18%  -3.35%   0.13%   0.76%  -4.54%

 2013-1  -0.09%   0.11%   0.02%   0.56%   0.34%   0.94%

 2017-1   0.00%  -0.30%   0.18%  -0.36%   0.34%  -0.14%

 2021-1   0.00%   0.81%   1.39%   0.03%  -0.30%   1.94%

 

 Avg     -1.17%   0.35%  -0.54%  -0.08%   0.10%  -0.64%

 

SPX summary for PY1 1953 -  2021

 Avg     -0.25%   0.11%   0.03%   0.13%   0.04%   0.12%

 Win%       36%     56%     72%     67%     56%     56%

 

SPX summary for all years 1953 - 2024

 Avg     -0.08%   0.08%  -0.06%   0.04%   0.00%   0.00%

 Win%       44%     57%     54%     58%     57%     51%

 

Conclusion

Every measure of breadth went negative last week and there has been no sign of a bottom.

The strongest sectors last week were Energy (for the 2^nd week) and Precious Metals while the weakest were Leisure and Finance.

I expect the major averages to be lower on Friday January 17 than they were on Friday January 10. 

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