The good news is:

• The S&P 500 (SPX) & Nasdaq composite (OTC) closed at all time highs last Friday.  The Dow Jones Industrial Average (DJIA) closed at an all time high last Wednesday.

 

The Negatives

The negatives are hard to find.

 

The Positives

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

NY NH confirmed the new high for the SPX last Friday.

 

The next chart is similar to the first one except it shows the OTC in blue and OTC NH in green has been calculated with Nasdaq data.  

OTC NH, also confirmed the OTC all time high last Friday.

 

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 finished the week at a strong 80%. 

 

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 finished the week at a strong 85%. 

 

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NY NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good).  

NY NL; NYSE new lows remained at non threatening levels last week.

 

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

OTC NL also remained at non threatening levels.

 

Seasonality

Next week includes the last 4 trading days of July and the first trading day of August during the first 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 1928 to 2024.  There are summaries for both the first year of the Presidential Cycle and all years combined. 

Seasonality for the coming week has been mixed and stronger during the first year of the Presidential Cycle than other years.

 

Report for the last 4 days of July and the first day 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 1 (PY1)

               Day4      Day3      Day2      Day1      Day1      Totals

 1965-1       0.08% 2  -0.17% 3   0.13% 4   0.74% 5   1.34% 1     2.11%

 1969-1      -1.39% 1  -1.63% 2  -1.33% 3  -0.58% 4   1.09% 5    -3.84%

 1973-1      -0.02% 4   0.17% 5  -0.44% 1  -0.22% 2  -1.39% 3    -1.89%

 1977-1      -0.59% 2  -1.12% 3  -0.56% 4  -0.03% 5   0.11% 1    -2.20%

 1981-1      -0.24% 2   0.02% 3   0.52% 4   0.76% 5  -0.58% 1     0.47%

 

 Avg         -0.43%    -0.55%    -0.34%     0.13%     0.11%      -1.07%

 

 1985-1       0.06% 5  -1.21% 1  -0.12% 2   0.23% 3   0.90% 4    -0.13%

 1989-1       0.59% 3   0.75% 4   0.08% 5   0.23% 1  -0.12% 2     1.52%

 1993-1      -0.50% 2   0.65% 3   0.23% 4  -0.36% 5   0.42% 1     0.45%

 1997-1      -0.39% 1   0.56% 2   1.00% 3   0.36% 4   0.03% 5     1.57%

 2001-1       1.95% 4   0.30% 5  -0.55% 1   0.46% 2   2.03% 3     4.19%

 

 Avg          0.34%     0.21%     0.13%     0.18%     0.65%       1.52%

 

 2005-1       0.43% 2   0.47% 3   0.56% 4  -0.62% 5   0.48% 1     1.32%

 2009-1       0.39% 2  -0.39% 3   0.84% 4  -0.29% 5   1.52% 1     2.07%

 2013-1       0.22% 5  -0.39% 1   0.48% 2   0.27% 3   1.36% 4     1.95%

 2017-1       0.16% 3  -0.63% 4  -0.12% 5  -0.41% 1   0.23% 2    -0.76%

 2021-1      -1.21% 2   0.70% 3   0.11% 4  -0.71% 5   0.06% 1    -1.07%

 

 Avg          0.00%    -0.05%     0.37%    -0.35%     0.73%       0.70%

 

OTC summary for PY1 1965 - 2021

Averages     -0.03%    -0.13%     0.06%    -0.01%     0.50%       0.38%

% Winners       53%       53%       60%       47%       80%         60%

MDD  7/31/1969  4.84% --  7/29/1977  2.29% --  8/1/1973  2.04%

 

OTC summary for all years 1963 - 2024

Averages     -0.02%    -0.03%     0.02%     0.03%    -0.04%      -0.04%

% Winners       47%       47%       61%       52%       52%         52%

MDD 7/28/2000  9.10% --  8/1/1974  5.28% --  7/31/1969  4.84%

 

SPX PY1

               Day4      Day3      Day2      Day1      Day1      Totals

 1929-1      -0.38% 6  -1.30% 1   1.14% 2   1.33% 3   0.69% 4     1.48%

 1933-1       2.62% 3   0.85% 4  -2.34% 5  -4.60% 1   3.02% 2    -0.46%

 1937-1      -1.53% 3  -0.36% 4   0.30% 5   1.25% 6   0.53% 1     0.20%

 1941-1       0.77% 1  -0.19% 2  -0.48% 3  -0.10% 4  -0.48% 5    -0.48%

 

 1945-1      -2.04% 4   0.49% 5   1.04% 1   0.41% 2   0.14% 3     0.03%

 1949-1       0.80% 2   0.00% 3  -0.13% 4   0.00% 5   0.53% 1     1.20%

 1953-1       0.17% 2   0.62% 3   0.95% 4   1.06% 5   0.36% 1     3.16%

 1957-1      -0.33% 5  -1.09% 1   0.00% 2  -0.02% 3  -0.25% 4    -1.69%

 1961-1       0.94% 3   1.17% 4   0.15% 5   0.07% 1   0.91% 2     3.24%

 

 Avg         -0.09%     0.24%     0.40%     0.31%     0.34%       1.19%

 

 1965-1      -0.21% 2   0.19% 3   0.77% 4   0.67% 5   0.20% 1     1.62%

 1969-1      -1.90% 1  -0.81% 2   0.50% 3   2.11% 4   1.79% 5     1.69%

 1973-1       0.19% 4  -0.24% 5  -0.31% 1  -0.94% 2  -1.28% 3    -2.58%

 1977-1      -0.58% 2  -1.63% 3   0.15% 4   0.06% 5   0.27% 1    -1.71%

 1981-1      -0.59% 2   0.02% 3   0.66% 4   0.70% 5  -0.34% 1     0.45%

 

 Avg         -0.62%    -0.49%     0.36%     0.52%     0.13%      -0.11%

 

 1985-1       0.18% 5  -1.46% 1   0.17% 2   0.52% 3   0.62% 4     0.04%

 1989-1       1.25% 3   1.17% 4   0.05% 5   1.15% 1  -0.67% 2     2.94%

 1993-1      -0.19% 2  -0.23% 3   0.68% 4  -0.47% 5   0.45% 1     0.24%

 1997-1      -0.25% 1   0.62% 2   1.06% 3   0.21% 4  -0.75% 5     0.90%

 2001-1       1.04% 4   0.24% 5  -0.11% 1   0.56% 2   0.39% 3     2.12%

 

 Avg          0.41%     0.07%     0.37%     0.39%     0.01%       1.25%

 

 2005-1       0.17% 2   0.46% 3   0.56% 4  -0.77% 5   0.09% 1     0.52%

 2009-1      -0.26% 2  -0.46% 3   1.19% 4   0.07% 5   1.53% 1     2.08%

 2013-1       0.08% 5  -0.37% 1   0.04% 2  -0.01% 3   1.25% 4     0.99%

 2017-1       0.03% 3  -0.10% 4  -0.13% 5  -0.07% 1   0.24% 2    -0.03%

 2021-1      -0.47% 2  -0.02% 3   0.42% 4  -0.54% 5  -0.18% 1    -0.79%

 

 Avg         -0.09%    -0.10%     0.41%    -0.26%     0.59%       0.55%

 

SPX summary for PY1 1929 - 2021

Averages     -0.02%    -0.10%     0.26%     0.11%     0.38%       0.63%

% Winners       50%       42%       71%       58%       71%         71%

MDD  7/31/1933  6.84% --  8/1/1973  2.75% --  7/29/1969  2.70%

 

SPX summary for all years 1928 - 2024

Averages      0.03%     0.10%     0.14%     0.07%     0.07%       0.41%

% Winners       56%       51%       61%       60%       50%         59%

MDD 7/31/1933  6.84% --  7/28/1936  6.38% --  8/1/1974  6.23%

 

August

Since 1963, over all years, the OTC in August has been up 60% of the time with an average gain of 0.4%.  During the first year of the Presidential Cycle the OTC in August has been up 47% of the time with an average gain of 0.1%.  The best August ever for the OTC was 2000 (+11.7%), the worst 1998 (-19.9%).

The average month has 21 trading days.  The charts below have been calculated by averaging the daily percentage change for each of the first 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 first trading day and at 5 trading day intervals after that.  The line is solid on the 11^th trading day, the dividing point.

In the chart below, the blue line shows the average daily performance of the OTC in August over all years since 1963, while the green line shows the average during the first 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 0.7%.  During the first year of the Presidential Cycle the SPX has been up 50% of the time with no average loss or gain -0.0%.  The best August ever 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 average daily performance over all years since 1928 for the SPX in August in red and the average daily performance during the first year of the Presidential Cycle, over the same period, in green.

 

Since 1979 the Russell 2000 (R2K) has been up 54% of the time in August with an average gain of 0.1%.  During the first year of the Presidential Cycle the R2K has been up 45% of the time with an average loss of -0.5%.  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 average daily performance of the R2K, over all years since 1979, in August in magenta and the average daily performance during the first year of the Presidential Cycle in green.

 

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 64% of the time in August with an average gain of 1.2%.  During the first year of the Presidential Cycle the DJIA has been up 57% of the time in August with an average gain of 0.8%.  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 average daily performance over all years for the DJIA in August in grey and the average performance during the first year of the Presidential Cycle in green.

 

Conclusion

The all time highs last week were confirmed by the breadth indicators, implying higher highs in the future.

The strongest sectors last week were Basic Materials and Transportation while the weakest were Precious Metals and Electronics.

I expect the major averages to be higher on Friday Aug 1 than they were on Friday July 25.

 

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