Technical Market Report For July 22, 2023
The good news is:
- The Nasdaq composite (OTC), S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) all closed at their highs for the year late last week.
The Negatives
The market is overbought.
The Positives
Everything was good last week.
New highs expanded and new lows continued to decline.
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 remained in positive territory last week.
The next chart is similar to the first one above except it shows the SPX in red and NY HL ratio, in blue, has been calculated with NYSE data.
NY HL ratio moved upward to a very strong 92%.
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 Wednesday’s SPX high for the year.
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 moved sharply upward confirming Wednesday’s OTC high for the year.
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 upward 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 also moved upward last week.
Summation indices are running totals of oscillator values.
Short term momentum indicators applied to summation indices make them binary so position is most 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 are at the top of the chart.
The next chart is similar to the one above, except is shows the OTC, in blue, as the index and the SI’s have been generated from Nasdaq data.
All of Nasdaq SI’s are all at or near the top of the chart.
Seasonality
Next week includes the 5 trading days prior to the 4th Friday of July 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 modestly positive by all measures.
Report for the week before the 4th Friday of July. 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 -0.27% 0.30% -0.39% 0.99% -0.36% 0.28% 1967-3 0.21% -0.33% -0.06% 0.37% 0.76% 0.95% 1971-3 -0.55% 0.38% -0.05% -0.18% 0.08% -0.32% 1975-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1979-3 -0.30% 0.33% 0.69% 0.40% 0.36% 1.47% Avg -0.23% 0.17% 0.05% 0.39% 0.21% 0.60% 1983-3 -0.82% 0.28% 1.80% 0.80% -2.69% -0.63% 1987-3 -0.06% 0.26% 0.29% 0.55% 0.31% 1.35% 1991-3 -0.51% -1.08% -0.46% 0.59% 0.49% -0.97% 1995-3 1.75% 1.55% 0.65% 1.05% -0.53% 4.46% 1999-3 -1.19% -3.47% 1.08% -2.80% 0.30% -6.08% Avg -0.17% -0.49% 0.67% 0.04% -0.42% -0.38% 2003-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2007-3 0.11% -1.89% 0.31% -1.84% -1.43% -4.73% 2011-3 -0.89% 2.22% -0.43% 0.72% 0.86% 2.48% 2015-3 -0.96% 0.98% 0.44% 0.33% -0.01% 0.79% 2019-3 0.71% 0.58% 0.85% -1.00% 1.11% 2.25% Avg -0.26% 0.47% 0.29% -0.45% 0.13% 0.20% OTC summary for PY3 1963 - 2019 Avg -0.21% 0.01% 0.36% 0.00% -0.06% 0.10% Win% 31% 69% 62% 69% 62% 62% OTC summary for all years 1963 - 2022 Avg -0.26% -0.02% 0.24% 0.08% 0.00% 0.04% Win% 45% 57% 61% 63% 61% 57% SPX PY3 Year Mon Tue Wed Thur Fri Totals 1955-3 -0.09% -0.61% 0.31% 0.97% 0.84% 1.42% 1959-3 0.62% 0.50% 0.50% -0.20% 0.02% 1.44% 1963-3 -0.66% 0.01% 0.54% -0.03% 0.41% 0.28% 1967-3 -0.33% 0.01% 0.34% 0.31% 0.15% 0.48% 1971-3 -0.18% 0.39% -0.04% -0.17% -0.17% -0.17% 1975-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1979-3 -0.23% 0.37% 1.09% 0.02% 0.00% 1.26% Avg -0.35% 0.20% 0.48% 0.03% 0.13% 0.46% 1983-3 -0.21% 0.54% 2.71% -0.14% -0.10% 2.80% 1987-3 0.45% 0.54% 1.06% 0.76% 0.19% 3.00% 1991-3 -0.35% -0.90% -0.21% 0.61% -0.01% -0.85% 1995-3 0.54% 0.80% 0.09% 0.64% -0.41% 1.68% 1999-3 -0.78% -2.17% 0.16% -1.33% -0.29% -4.42% Avg -0.07% -0.24% 0.76% 0.11% -0.12% 0.44% 2003-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2007-3 0.49% -1.98% 0.47% -2.33% -1.60% -4.96% 2011-3 -0.81% 1.63% -0.07% 1.35% 0.09% 2.20% 2015-3 -0.58% 1.24% 0.73% 0.00% -0.23% 1.17% 2019-3 0.28% 0.68% 0.47% -0.53% 0.74% 1.65% Avg -0.16% 0.39% 0.40% -0.38% -0.25% 0.01% SPX summary for PY3 1955 - 2019 Avg -0.12% 0.07% 0.54% 0.00% -0.03% 0.46% Win% 33% 73% 80% 53% 50% 73% SPX summary for all years 1953 - 2022 Avg -0.19% -0.01% 0.35% 0.16% 0.01% 0.33% Win% 35% 55% 65% 61% 60% 60%
Conclusion
The market is overbought.
The DJIA has been up for 10 consecutive days closing at its high for the year on Friday. The OTC and SPX closed at their highs for the year on Wednesday.
The index highs were confirmed by expanding numbers of new highs, but not advance decline lines.
The strongest sectors last week were Energy and Utilities while the weakest were Electronics and Telecom (for the 2nd week).
I expect the major averages to be lower on Friday, July 28 than they were on Friday, July 21.
Last week the OTC was down while the other major averages were up. So, I am calling last week's negative forecast a tie.
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