The good news is:

• It should be easy to spot when this period of weakness ends.

 

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 first trading day of each month.  

OTC NH declined sharply last week. 

 

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: This one is scary.  Nothing good will happen until NY NL turns upward.

 

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 this one is also scary.

 

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; The last time OTC HL Ratio was this low was last April. 

 

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 last April was the last time NY HL Radio was below the neutral line.

 

The Positives

The market environment will not be positive until the breadth indicators turn upward.  That should be an easy observation to make.

 

Seasonality

Next week includes the 5 trading days prior to the second Friday of November 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 1953 to 2024.  There are summaries for both the first 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. 

Seasonality for the coming week has been modestly positive by all measures.

 

Report for the week before the second Friday of November.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday to second Friday.

 

OTC Presidential Year 1 (PY1)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1965-1  -0.13%  -0.27%  -0.36%   0.09%  -0.04%  -0.70%

 1969-1   0.79%   0.38%  -0.21%   0.44%  -0.37%   1.03%

 1973-1  -1.66%  -0.77%   0.40%   0.55%  -1.44%  -2.91%

 1977-1   0.66%   0.37%   0.50%   1.30%   0.96%   3.78%

 1981-1  -0.03%  -0.01%   0.08%   0.47%  -0.41%   0.10%

 

 Avg     -0.07%  -0.06%   0.08%   0.57%  -0.26%   0.26%

 

 1985-1   0.04%   0.35%   0.50%   0.25%   0.86%   2.00%

 1989-1  -1.09%   0.31%   1.03%   0.00%   0.47%   0.72%

 1993-1   0.42%   0.47%   0.87%   0.32%   0.04%   2.12%

 1997-1  -0.73%  -0.36%  -2.73%   1.04%   1.66%  -1.13%

 2001-1   2.74%   2.31%   0.13%  -0.53%   0.04%   4.70%

 

 Avg      0.28%   0.61%  -0.04%   0.22%   0.61%   1.68%

 

 2005-1   0.41%  -0.28%   0.17%   0.96%   0.26%   1.52%

 2009-1   1.97%  -0.14%   0.74%  -0.83%   0.88%   2.62%

 2013-1   0.37%   0.08%  -0.20%  -1.90%   1.60%  -0.04%

 2017-1   0.32%  -0.27%   0.31%  -0.57%   0.01%  -0.20%

 2021-1   0.07%  -0.60%  -1.66%   0.52%   1.00%  -0.67%

 

 Avg      0.63%  -0.24%  -0.13%  -0.36%   0.75%   0.65%

 

OTC summary for PY1 1965 - 2021 

 Avg      0.28%   0.10%  -0.03%   0.14%   0.37%   0.86%

 Win%       67%     47%     67%     73%     73%     60%

 

OTC summary for all years 1963 - 2024

 Avg      0.03%   0.14%  -0.11%   0.23%   0.01%   0.30%

 Win%       52%     61%     55%     55%     64%     52%

 

SPX PY1

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1953-1   0.20%  -1.18%   0.00%   0.37%   0.33%  -0.28%

 1957-1  -0.17%   0.00%   0.15%   0.59%  -1.18%  -0.61%

 1961-1   0.78%   0.00%   1.23%  -0.14%   0.42%   2.29%

 

 1965-1  -0.15%  -0.33%  -0.11%   0.30%   0.48%   0.20%

 1969-1   0.07%  -0.26%  -0.18%  -0.48%  -0.36%  -1.22%

 1973-1  -1.45%  -0.53%   0.80%   1.15%  -1.61%  -1.63%

 1977-1   0.78%   0.18%   0.56%   1.86%   1.34%   4.72%

 1981-1   0.51%  -0.48%   0.18%   0.22%  -1.23%  -0.81%

 

 Avg     -0.05%  -0.28%   0.25%   0.61%  -0.28%   0.25%

 

 1985-1  -0.15%   0.59%   0.20%  -0.07%   0.57%   1.14%

 1989-1  -1.48%   0.66%   1.00%  -0.47%   0.75%   0.46%

 1993-1   0.14%   0.03%   0.74%  -0.23%   0.59%   1.26%

 1997-1  -0.69%   0.29%  -1.93%   1.18%   1.27%   0.13%

 2001-1   1.44%   1.45%  -0.27%   0.25%   0.16%   3.02%

 

 Avg     -0.15%   0.60%  -0.05%   0.13%   0.67%   1.20%

 

 2005-1   0.22%  -0.35%   0.17%   0.84%   0.31%   1.19%

 2009-1   2.22%  -0.01%   0.50%  -1.03%   0.57%   2.27%

 2013-1   0.36%  -0.28%   0.43%  -1.32%   1.34%   0.53%

 2017-1   0.13%  -0.02%   0.14%  -0.38%  -0.09%  -0.21%

 2021-1   0.09%  -0.35%  -0.82%   0.06%   0.72%  -0.31%

 

 Avg      0.60%  -0.20%   0.08%  -0.36%   0.57%   0.69%

 

SPX summary for PY1 1953 - 2021 

 Avg      0.16%  -0.04%   0.16%   0.15%   0.24%   0.67%

 Win%       67%     38%     71%     56%     72%     61%

 

SPX summary for all years 1953 - 2024

 Avg      0.06%   0.13%  -0.04%   0.23%   0.02%   0.38%

 Win%       57%     52%     59%     57%     59%     58%

 

Conclusion

Volume last week was unremarkable so this period of weakness probably has a bit further to go.

The strongest sectors last week were Energy (for the 3^rd week) and Finance the weakest were Internet and Electronics.

I expect the major averages to be lower on Friday November 14 than they were on Friday November 7.

Last week's positive forecast was a miss.

 

 

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