The good news is the Federal Reserve Bank has decided to buy everything including junk bonds. Your investments are safe until they change their minds.

The Negatives

Not much has changed in the past few weeks. Volume on the Nasdaq has continued at incredibly high levels. There is little fear because the Fed has declared they will support everything financial.

Leadership continues to narrow; there have been very few new highs considering the major 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 1st trading day of each month.

The lack of broad market support continues.

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

NYSE is a little worse.

We have historically bizarre volume numbers on the Nasdaq.

The chart below covers the past 10 years showing the OTC in blue and a 5% trend (39 day EMA) of Nasdaq upside volume (OTC UV) in green.Dashed vertical lines have been drawn on the 1st trading day of each year.

This is a 10-year chart; there has never been anything similar.

The next chart also covers the past 10 years showing the OTC in blue and a 5% trend (39 day EMA) of Nasdaq downside volume (OTC DV) in brown.OTC DV has been plotted on an inverted Y axis so diminishing downside volume move the indicator upward (Up is good).

Downside volume diminished a bit following the March bottom, but remains at higher levels than previous panic bottoms.

As an analyst I look for historical similarities.There are none.

The Positives

The Plunge Protection Team (PPT) AKA Presidents Working Group on Financial Markets let the market fall a bit last week. Record highs under current economic conditions must seem a little bizarre even for them.

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 Radio dipped a bit last week, closing out the week at a comfortable 72%. 

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 finished the week at a strong 80%.

Seasonality

Next week includes the last two trading days of June and the first three trading days of July 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. There are summaries for both the fourth year of the Presidential Cycle and all years combined.  

Returns for next week have, on average, been positive by all measures.

Report for the last two days of June and first three days of July.

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)

               Day2 Day1 Day1 Day2 Day3Totals

 1964-4 0.40% 1-0.05% 2 0.07% 3 0.62% 4 0.20% 1 1.25%

 1968-4-0.33% 4-0.22% 5 0.12% 1 0.36% 2 0.46% 3 0.39%

 1972-4-0.18% 4 0.56% 5 0.39% 1 0.53% 3 0.44% 4 1.75%

 1976-4 0.27% 2 0.23% 3-0.04% 4 0.66% 5-0.29% 2 0.83%

 1980-4 0.11% 5-0.88% 1 0.25% 2 0.64% 3 1.06% 4 1.18%

 1984-4 0.47% 4 0.56% 5-0.73% 1 0.16% 2-0.19% 4 0.27%

 1988-4 0.00% 3 0.77% 4 0.01% 5 0.36% 2-0.17% 3 0.96%

 1992-4 2.00% 1 0.86% 2 0.96% 3-0.99% 4-0.03% 1 2.79%

 1996-4 1.10% 4 1.63% 5 1.05% 1-0.52% 2-0.81% 3 2.45%

 Avg0.74% 0.59% 0.31%-0.07%-0.03% 1.53%

 2000-4-1.60% 4 2.29% 5 0.65% 1-3.23% 3 2.52% 4 0.64%

 2004-4 0.75% 2 0.63% 3-1.57% 4-0.44% 5-2.15% 2-2.79%

 2008-4-0.25% 5-0.98% 1 0.52% 2-2.32% 3-0.27% 4-3.29%

 2012-4-0.90% 4 3.00% 5 0.55% 1 0.84% 2 0.00% 4 3.50%

 2016-4 1.86% 3 1.33% 4 0.41% 5-0.82% 2 0.75% 3 3.54%

 Avg -0.03% 1.26% 0.11%-1.19% 0.17% 0.32%

OTC summary for PY4 1964 - 2016

Averages 0.26% 0.70% 0.19%-0.30% 0.11% 0.96%

% Winners 57% 71% 79% 57% 50% 86%

MDD7/6/20044.12% --7/3/20083.27% --7/5/20003.23%

OTC summary for all years 1963 - 2019

Averages 0.10% 0.28% 0.16%-0.21% 0.05% 0.38%

% Winners 63% 65% 63% 49% 53% 63%

MDD 7/2/20027.20% --7/3/19745.89% --7/2/20105.80%

Year 4

               Day2 Day1 Day1 Day2 Day3 Totals

 1928-4 0.37% 5 0.26% 6-1.09% 1 1.63% 2 0.98% 4 2.15%

 1932-4 1.58% 3-1.77% 4 3.84% 5-2.17% 2 2.22% 3 3.69%

 1936-4-0.53% 1-0.34% 2 0.40% 3-0.13% 4 0.94% 5 0.34%

 1940-4 1.32% 5 0.00% 6-1.10% 1-0.20% 2 0.30% 3 0.32%

 1944-4-0.08% 4 0.31% 5 0.08% 6 0.92% 1 0.53% 3 1.77%

 1948-4 0.48% 2 0.30% 3-0.24% 4 0.90% 5 0.00% 2 1.44%

 1952-4 0.32% 5 0.52% 1 0.64% 2-0.24% 3-0.04% 4 1.21%

 1956-4 0.13% 4-0.34% 5-0.09% 1 0.83% 2 1.01% 4 1.55%

 Avg 0.43% 0.16%-0.14% 0.44% 0.36% 1.26%

 1960-4 0.00% 3-0.04% 4 0.25% 5-0.07% 2-0.14% 3 0.00%

 1964-4 0.22% 1 0.06% 2 0.71% 3 0.40% 4 0.46% 1 1.85%

 1968-4-0.10% 4-0.40% 5-0.18% 1 0.34% 2 1.17% 3 0.83%

 1972-4-0.19% 4 0.30% 5 0.33% 1 0.57% 3 0.87% 4 1.88%

 1976-4 0.42% 2 0.40% 3-0.66% 4 0.50% 5-0.55% 2 0.11%

 Avg 0.07% 0.07% 0.09% 0.35% 0.36% 0.94%

 1980-4-0.16% 5-1.52% 1 0.60% 2 0.65% 3 1.54% 4 1.11%

 1984-4 0.79% 4 0.22% 5 0.01% 1 0.33% 2-0.61% 4 0.74%

 1988-4-0.49% 3 0.93% 4-0.63% 5 1.48% 2-1.37% 3-0.08%

 1992-4 1.36% 1-0.20% 2 1.16% 3-0.27% 4 0.50% 1 2.56%

 1996-4 0.63% 4 0.31% 5 0.78% 1-0.34% 2-0.18% 3 1.21%

 Avg 0.43%-0.05% 0.39% 0.37%-0.02% 1.11%

 2000-4-0.85% 4 0.85% 5 1.01% 1-1.57% 3 0.73% 4 0.16%

 2004-4 0.25% 2 0.41% 3-1.04% 4-0.32% 5-0.81% 2-1.51%

 2008-4-0.37% 5 0.13% 1 0.38% 2-1.82% 3 0.11% 4-1.57%

 2012-4-0.21% 4 2.49% 5 0.25% 1 0.62% 2-0.47% 4 2.68%

 2016-4 1.70% 3 1.36% 4 0.19% 5-0.68% 2 0.54% 3 3.11%

 Avg 0.10% 1.05% 0.16%-0.75% 0.02% 0.57%

SPX summary for PY4 1928 - 2016

Averages 0.29% 0.18% 0.24% 0.06% 0.34% 1.11%

% Winners 57% 65% 65% 52% 61% 87%

MDD7/5/19322.17% --7/6/20042.16% --7/2/20081.82%

SPX summary for all years 1928 - 2019

Average s0.12% 0.16% 0.33% 0.16% 0.30% 1.05%

% Winners 58% 59% 73% 58% 62% 74%

MDD 7/2/20104.84% --6/30/19314.32% --7/2/20024.30%

July

Since 1963, over all years, the OTC in July has been up 54% of the time with an average gain of 0.5%. During the fourth year of the Presidential Cycle July has been up 50% time with an average loss of -0.5%. The best July ever for the OTC was 1997 (+10.5%), the worst 2002 (-9.2%).

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 July over all years since 1963 while the green line shows the average during the 4th year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 59% of the time in July with an average gain of 1.5%. During the fourth year of the Presidential Cycle the SPX has been up 52% of the time with an average gain of 2.1% (helped by a 37.7% gain in 1932).The best July ever for the SPX was 1932 (+37.7%) the worst 1934 (-11.5%).

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

Since 1979 the Russell 2000 (R2K) has been up 51% of the time in July with an average loss of -0.2%. During the fourth year of the Presidential Cycle the R2K has been up 40% of the time with an average loss of -0.3%. The best July ever for the R2K, 1980 (+11.0%), the worst 2002 (-15.2%)

The chart below is similar to those above except it shows the daily performance over all years for the R2K in July in magenta and the performance during the 4th year of the Presidential Cycle in green.

Since 1885 the DJIA has been up 62% of the time in July with an average gain of 1.2%. During the fourth year of the Presidential Cycle the DJIA has been up 58% of the time in July with an average gain of 1.7%. The best July ever for the DJIA 1932 (+26.7%), the worst 1893 (-15.7%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in July in grey and the performance during the 4th year of the Presidential Cycle in green.

Conclusion

The PPT allowed the market to decline last week. Record highs under the current economic conditions must look silly even to them

The strongest sectors last week were precious metals and Internet; the weakest were Energy Services and Banks. 

I expect the major averages to be higher on Friday, July 3, than they were on Friday, June 26,.In the PPT I trust.

Last weeks positive forecast was a miss. The PPT let me down.