Technical Market Report For May 9
The good news is The Russell 2000 (R2K) had another good week; that’s three in a row.
The Negatives
With the small caps leading the way upward you would expect big and expanding numbers of new highs. That has not been the case.
The first chart covers the past six 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 first trading day of each month.
The 33% rise in the OTC over the past six weeks has generated minimal activity in OTC NH.
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.
There has been a 31% rise in the SPX while NY NH has remained comatose.
The Positives
The number of new lows has remained insignificant.
The next chart covers the past six 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 Ratio has remained positive for the past two weeks and finished the week at a comfortable 71%.
The next chart is similar to the first one 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 five trading days prior to the third Friday of May 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 1953 to 2019.There are summaries for both the fourth year of the Presidential Cycle and all years combined. Prior to 1953 the market traded six days a week so that data has been ignored.
Returns for the coming week have, on average, been negative by all measures.
Report for the week before the third Friday of May.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through third Friday.
OTC Presidential Year 4 (PY4)
Year Mon Tue Wed Thu rFri Totals
1964-4 0.13%-0.28% 0.25%-0.40%-0.38%-0.68%
1968-4 0.67%-0.38%-0.53%-0.07%-0.30%-0.62%
1972-4 0.70% 0.02%-0.46% 0.82% 1.02% 2.09%
1976-4-0.32% 0.04%-0.31% 0.31%-0.16%-0.43%
1980-4-0.07% 0.80% 1.08% 0.66% 0.42% 2.89%
1984-4-0.68% 0.05%-0.13%-1.03%-0.61%-2.40%
1988-4 0.23%-0.29%-1.42%-0.20%-0.06%-1.74%
1992-4 0.23%-0.54%-0.27%-1.02%-0.35%-1.95%
1996-4 1.59% 1.03%-0.07% 0.46% 0.21% 3.22%
Avg0.26% 0.21%-0.16%-0.23%-0.08% 0.01%
2000-4 2.23% 3.05%-1.95%-2.92%-4.19%-3.79%
2004-4-1.45% 1.13% 0.02%-0.08% 0.82% 0.43%
2008-4 1.76% 0.27% 0.06% 1.48%-0.19% 3.38%
2012-4-1.06%-0.30%-0.68%-2.10%-1.24%-5.39%
2016-4 1.22%-1.25% 0.50%-0.56% 1.21% 1.12%
Avg0.54% 0.58%-0.41%-0.84%-0.72%-0.85%
OTC summary for PY4 1964 - 2016
Avg0.37% 0.24%-0.28%-0.33%-0.27%-0.28%
Win% 64% 57% 36% 36% 36% 43%
OTC summary for all years 1963 - 2019
Avg -0.05% 0.00% 0.02% 0.00%-0.18%-0.23%
Win% 49% 46% 60% 51% 43% 47%
SPX PY4
Year Mon Tue Wed Thur Fri Totals
1956-4-0.55%-1.05%-0.69% 1.22%-0.47%-1.54%
1960-4-0.09% 0.38%-0.04% 0.43% 0.27% 0.96%
1964-4-0.12% 0.32%-0.23%-0.14% 0.30% 0.12%
1968-4-0.31%-0.07%-0.05%-0.48%-0.72%-1.63%
1972-4 0.45%-0.19% 0.22% 0.98% 0.96% 2.43%
1976-4-0.25% 0.17%-0.08% 0.81%-0.73%-0.07%
Avg -0.06% 0.12%-0.04% 0.32% 0.02% 0.36%
1980-4 0.06% 1.45% 0.52% 0.13% 0.34% 2.49%
1984-4-0.62% 0.32%-0.01%-0.90%-0.51%-1.72%
1988-4 0.75%-1.28%-1.58% 0.49% 0.18%-1.45%
1992-4 0.59%-0.53% 0.04%-0.79%-0.74%-1.43%
1996-4 1.44% 0.62%-0.03%-0.09% 0.61% 2.56%
Avg0.44% 0.12%-0.21%-0.23%-0.02% 0.09%
2000-4 2.21% 0.94%-1.24%-0.73%-2.10%-0.93%
2004-4-1.06% 0.68%-0.26% 0.05% 0.40%-0.19%
2008-4 1.10%-0.04% 0.40% 1.06% 0.13% 2.65%
2012-4-1.11%-0.57%-0.44%-1.51%-0.74%-4.37%
2016-4 0.98%-0.94% 0.02%-0.37% 0.60% 0.29%
Avg0.42% 0.01%-0.30%-0.30%-0.34%-0.51%
SPX summary for PY$ 1956 - 2016
Avg0.22% 0.01%-0.22% 0.01%-0.14%-0.12%
Win% 50% 50% 31% 50% 56% 44%
SPX summary for all years 1953 - 2019
Avg -0.05% 0.05% 0.03%-0.05%-0.10%-0.11%
Win% 52% 51% 51% 51% 51% 48%
Conclusion
My faith in the PPT AKA The Working Group on Financial Markets has been restored.
The strongest sectors last week were Tech and Precious Metals; the weakest were Biotech and Utilities (same as last week).
I expect the major averages to be higher on Friday, May 15, than they were on Friday, May 8.