The good news is:

• The NASDAQ composite (OTC) closed at an all time high last Friday.

 

The Negatives

The first chart covers the last 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.  Dashed vertical lines have been drawn on the 1^st trading day of each month.  

OTC NH failed to confirm the new index high by a wide margin.  

The next chart is similar to the one above except it shows the SPX in red and NY NH in green has been calculated with NYSE data.  

NY NH continued falling in spite of rising prices on Friday.

The next chart covers the past 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 turned downward as the index hit a new all time high.

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 is also turned downward last week.

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them nearly binary.

The next chart covers the past 6 months showing the SPX in red and momentum of summation indices of oscillators of advancing and declining issues, new highs and new lows and upside and downside volume on the NYSE.  

The NY SI Mom’s all turned downward last week.

The next chart is similar to the one above; except it shows the NASDAQ composite (OTC), in blue and the SI’s have been generated from NASDAQ breadth data. 

The NASDAQ advance – decline and new high – new low SI’s turned downward while the volume SI remained maxed out to the upside. 

Five out of six of the SI mom’s have turned downward.

 

The Positives

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 fell last week, but remained in positive territory.

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 also fell, but remained in comfortably positive territory.

 

Seasonality

Next week includes the last 4 trading days of May during the 4^th 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 2023 while SPX data runs from 1928 to 2023.  There are summaries for both the 4^th year of the Presidential Cycle and all years combined.  

Average returns for the coming week have been positive by all measures. 

 

Report for the last 4 days of May.

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)

               Day4      Day3      Day2      Day1      Totals

 1964-4       0.03% 1  -0.28% 2   0.33% 3   0.15% 4     0.23%

 1968-4       0.67% 1   0.29% 2   0.46% 3   0.69% 5     2.12%

 1972-4       0.25% 4   0.11% 5  -0.37% 2  -0.69% 3    -0.70%

 1976-4      -0.39% 2   0.33% 3  -0.36% 4   0.30% 5    -0.12%

 1980-4       0.41% 2   0.40% 3  -0.40% 4   0.24% 5     0.65%

 

 Avg          0.20%     0.17%    -0.07%     0.14%       0.43%

 

 1984-4      -0.07% 5  -1.11% 2  -0.29% 3   0.38% 4    -1.09%

 1988-4       0.16% 3   0.43% 4  -0.17% 5   1.00% 2     1.41%

 1992-4      -0.80% 2   0.30% 3   0.54% 4   0.83% 5     0.87%

 1996-4      -0.92% 2  -0.87% 3   0.64% 4   0.80% 5    -0.34%

 2000-4      -1.99% 4  -0.01% 5   7.94% 2  -1.69% 3     4.24%

 

 Avg         -0.73%    -0.25%     1.73%     0.27%       1.02%

 

 2004-4       2.17% 2   0.59% 3   0.42% 4   0.11% 5     3.29%

 2008-4       1.50% 2   0.22% 3   0.87% 4   0.57% 5     3.16%

 2012-4      -0.07% 5   1.18% 2  -1.17% 3  -0.35% 4    -0.41%

 2016-4       0.70% 3   0.14% 4   0.65% 5   0.29% 2     1.78%

 2020-4       0.17% 2   0.77% 3  -0.46% 4   1.29% 5     1.77%

 

 Avg          0.89%     0.58%     0.06%     0.38%       1.92%

 

OTC summary for PY4 1964 - 2020

Averages      0.12%     0.17%     0.57%     0.26%       1.12%

% Winners       60%       73%       53%       80%         67%

MDD  5/26/2000  2.00% --  5/29/1996  1.78% --  5/31/2012  1.52%

 

OTC summary for all years 1963 - 2023

Averages      0.15%     0.14%     0.30%     0.18%       0.76%

% Winners       56%       62%       59%       62%         64%

MDD 5/30/2001  8.65% --  5/27/1970  3.17% --  5/25/1999  2.97%

 

Year 4

               Day4      Day3      Day2      Day1      Totals

 1928-4       0.15% 5  -1.66% 1   1.28% 2   0.91% 4     0.68%

 1932-4       1.59% 4  -5.48% 5   0.41% 6  -7.84% 2   -11.31%

 1936-4       1.40% 2  -0.21% 3  -0.83% 4   0.70% 5     1.06%

 1940-4       1.41% 1  -2.03% 2   0.65% 3   0.22% 5     0.25%

 

 1944-4       0.16% 5   0.25% 6   0.16% 1   0.65% 3     1.22%

 1948-4      -0.06% 2   0.91% 3   0.00% 4   0.06% 5     0.91%

 1952-4       0.21% 1  -0.25% 2  -0.17% 3   0.08% 4    -0.12%

 1956-4       0.04% 5  -1.17% 1   2.29% 2   0.20% 4     1.37%

 1960-4      -0.05% 3   0.07% 4   0.05% 5   0.16% 2     0.23%

 

 Avg          0.06%    -0.04%     0.47%     0.23%       0.72%

 

 1964-4      -0.21% 1  -0.21% 2  -0.16% 3   0.14% 4    -0.45%

 1968-4      -0.16% 1   0.65% 2   0.31% 3   0.78% 5     1.57%

 1972-4       0.14% 4   0.18% 5  -0.28% 2  -0.74% 3    -0.71%

 1976-4       0.05% 2  -0.15% 3   0.04% 4   0.80% 5     0.74%

 1980-4       0.71% 2   0.59% 3  -1.60% 4   0.88% 5     0.58%

 

 Avg          0.10%     0.21%    -0.34%     0.37%       0.35%

 

 1984-4       0.26% 5  -0.88% 2   0.04% 3   0.13% 4    -0.45%

 1988-4       0.10% 3   0.34% 4  -0.48% 5   3.45% 2     3.42%

 1992-4      -0.63% 2   0.18% 3   1.11% 4  -0.33% 5     0.33%

 1996-4      -0.93% 2  -0.64% 3   0.57% 4  -0.38% 5    -1.38%

 2000-4      -1.26% 4  -0.25% 5   3.23% 2  -0.13% 3     1.58%

 

 Avg         -0.49%    -0.25%     0.89%     0.55%       0.70%

 

 2004-4       1.61% 2   0.17% 3   0.57% 4  -0.05% 5     2.30%

 2008-4       0.68% 2   0.40% 3   0.53% 4   0.15% 5     1.77%

 2012-4      -0.22% 5   1.11% 2  -1.43% 3  -0.23% 4    -0.77%

 2016-4       0.70% 3  -0.02% 4   0.43% 5  -0.10% 2     1.01%

 2020-4       1.23% 2   1.48% 3  -0.21% 4   0.48% 5     2.98%

 Avg          0.80%     0.63%    -0.02%     0.05%       1.46%

 

SPX summary for PY4 1928 - 2020

Averages      0.29%    -0.28%     0.27%     0.00%       0.28%

% Winners       67%       50%       63%       67%         71%

MDD  5/31/1932  12.52% --  5/28/1940  2.03% --  5/28/1928  1.66%

 

SPX summary for all years 1928 - 2023

Averages      0.11%     0.00%     0.25%    -0.01%       0.34%

% Winners       57%       50%       62%       55%         63%

MDD 5/31/1932  12.52% --  5/28/1962  8.45% --  5/31/1935  4.49%

 

Conclusion

The Dow Jones Industrial Average and the Russell 2000 were down last week while the OTC and SPX were up.  Breadth was weak except for volume on the NASDAQ which has been running at its highest levels of the year (not so on the NYSE).

Seasonality for the coming holiday shortened week is very strong.

The strongest sectors last week were Precious Metals (for the 3^rd week) and Electronics while the weakest were Energy and Banks.

I expect the major averages to be higher on Friday May 31 than they were on Friday May 24. 

Last week the OTC and SPX were up while the DJIA and R2K were down.  So I am calling last weeks positive forecast a tie.

 

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