The good news is:

• The market had another good week; the Russell 2000 led the way, up 6% for the week.  

The Negatives

The new high / new low components of the Hindenburg Omen, a potential crash indicator developed by Jim Miekka, were met last Friday.

The first chart covers the past 6 months showing the Nasdaq composite (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 rose to its highest level since last August, but remains in negative territory.  New lows exceeded new highs every day, on both the NYSE and Nasdaq, last week.

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

NY HL ratio, ditto,

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 rose sharply, but the numbers remained in triple digits.

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

OTC NL ditto.

The Positives

New highs increased a little on both the NYSE and Nasdaq last week.  The numbers were small, but going in the right direction.

The next 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 moved sharply upward last week hitting a 6 month high.

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

NY NH moved sharply upward last week.

Seasonality

Next week includes the last trading day of October and the first 4 trading days of November during the 2^nd 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 2021 while SPX data runs from 1928 to 2021.  There are summaries for both the 2^nd year of the Presidential Cycle and all years combined. 

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

Report for the last day of October and first 4 days of November.

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 2 (PY2)

               Day1      Day1      Day2      Day3      Day4      Totals

 1966-2       0.40% 1  -0.30% 2   0.57% 3   0.40% 4   0.02% 5     1.08%

 1970-2       0.22% 5   0.15% 1  -0.17% 2   0.71% 3   0.45% 4     1.35%

 1974-2       0.54% 4  -0.26% 5  -0.68% 1   2.12% 2   0.18% 3     1.90%

 1978-2      -1.14% 2   3.18% 3  -0.02% 4   0.75% 5  -0.36% 1     2.42%


 1982-2       0.36% 5   0.89% 1   1.46% 2   2.35% 3   1.01% 4     6.06%

 1986-2      -0.08% 5   0.10% 1   0.21% 2   0.05% 3  -0.23% 4     0.05%

 1990-2       0.00% 3   0.23% 4   1.77% 5   1.28% 1  -0.07% 2     3.22%

 1994-2       0.17% 1  -0.68% 2  -0.05% 3   0.04% 4  -0.78% 5    -1.30%

 1998-2       0.81% 5   1.67% 1  -0.68% 2   1.96% 3   0.74% 4     4.49%


 Avg          0.25%     0.44%     0.54%     1.14%     0.13%       2.50%


 2002-2       0.23% 4   2.33% 5   2.63% 1   0.33% 2   1.27% 3     6.79%

 2006-2       0.12% 2  -1.37% 3  -0.01% 4  -0.14% 5   1.51% 1     0.11%

 2010-2       0.00% 5  -0.10% 1   1.14% 2   0.27% 3   1.46% 4     2.77%

 2014-2       1.41% 5   0.18% 1  -0.33% 2  -0.06% 3   0.38% 4     1.58%

 2018-2       2.01% 3   1.75% 4  -1.04% 5  -0.38% 1   0.64% 2     2.99%


 Avg          0.76%     0.56%     0.48%     0.00%     1.05%       2.85%


OTC summary for PY2 1966 - 2018

Averages      0.36%     0.55%     0.34%     0.69%     0.44%       2.39%

% Winners       86%       64%       43%       79%       71%         93%

MDD  11/3/2006  1.52% --  11/4/1994  1.47% --  11/5/2018  1.42%


OTC summary for all years 1963 - 2021

Averages      0.39%     0.29%     0.23%     0.30%     0.22%       1.43%

% Winners       64%       66%       54%       66%       60%         73%

MDD 11/6/2008  9.63% --  11/1/2011  4.76% --  11/6/1973  3.92%


SPX PY2

               Day1      Day1      Day2      Day3      Day4      Totals

 1930-2      -2.31% 5   0.89% 6   0.23% 1  -2.98% 3   0.18% 4    -3.98%

 1934-2       0.23% 3  -0.45% 4   1.14% 5   0.90% 6   0.78% 1     2.60%

 1938-2       0.46% 1  -0.53% 2   0.38% 3   0.30% 4  -0.15% 5     0.46%


 1942-2       0.64% 6   0.64% 1  -0.42% 3   0.21% 4   1.27% 5     2.34%

 1946-2       3.63% 4   1.55% 5   0.73% 6   0.99% 1  -4.31% 3     2.59%

 1950-2      -0.41% 2   0.15% 3   0.87% 4   0.61% 5  -0.35% 6     0.87%

 1954-2      -0.63% 5   0.35% 1   2.04% 3   1.17% 4  -0.34% 5     2.60%

 1958-2       0.12% 5   0.45% 1   0.91% 3   0.81% 4  -0.36% 5     1.92%


 Avg          0.67%     0.63%     0.83%     0.76%    -0.82%       2.06%


 1962-2      -0.04% 3   1.06% 4   1.10% 5   1.04% 1   0.62% 3     3.79%

 1966-2      -0.05% 1   0.76% 2   0.09% 3  -0.40% 4   0.31% 5     0.71%

 1970-2      -0.13% 5   0.31% 1   0.85% 2   0.20% 3  -0.34% 4     0.89%

 1974-2      -0.55% 4  -0.03% 5  -1.08% 1   2.78% 2  -0.48% 3     0.64%

 1978-2      -2.01% 2   3.97% 3  -1.28% 4   0.60% 5  -1.03% 1     0.25%


 Avg         -0.56%     1.22%    -0.06%     0.84%    -0.18%       1.25%


 1982-2       0.09% 5   1.32% 1   1.49% 2   3.91% 3  -0.71% 4     6.10%

 1986-2       0.11% 5   0.75% 1   0.16% 2   0.15% 3  -0.29% 4     0.89%

 1990-2      -0.02% 3   0.99% 4   1.57% 5   0.88% 1  -0.94% 2     2.48%

 1994-2      -0.30% 1  -0.83% 2  -0.41% 3   0.30% 4  -1.20% 5    -2.44%

 1998-2       1.18% 5   1.17% 1  -0.07% 2   0.71% 3   1.34% 4     4.33%


 Avg          0.21%     0.68%     0.55%     1.19%    -0.36%       2.27%


 2002-2      -0.55% 4   1.71% 5   0.82% 1   0.78% 2   0.91% 3     3.67%

 2006-2       0.00% 2  -0.74% 3  -0.03% 4  -0.22% 5   1.13% 1     0.14%

 2010-2      -0.04% 5   0.09% 1   0.78% 2   0.37% 3   1.93% 4     3.12%

 2014-2       1.17% 5  -0.01% 1  -0.28% 2   0.57% 3   0.38% 4     1.83%

 2018-2       1.09% 3   1.06% 4  -0.63% 5   0.56% 1   0.63% 2     2.70%


 Avg          0.33%     0.42%     0.13%     0.41%     1.00%       2.29%


SPX summary for PY2 1930 - 2018

Averages      0.07%     0.64%     0.39%     0.62%    -0.04%       1.67%

% Winners       48%       74%       65%       87%       48%         91%

MDD  11/6/1946  4.31% --  11/5/1930  4.15% --  11/4/1994  2.43%


SPX summary for all years 1928 - 2021

Averages      0.20%     0.25%     0.00%     0.28%     0.08%       0.81%

% Winners       56%       64%       58%       66%       55%         71%

MDD 11/6/1929  14.66% --  11/6/2008  10.03% --  11/5/1948  7.60%

Conclusion

Liquidity continues to be a problem worldwide. 

Seasonality for next week is very strong.

Last week new highs increased while new lows decreased. 

We have indications that a market bottom occurred earlier this month.

There are some important exceptions to the bottom interpretation including new lows have not diminished rapidly as they do after a climactic low and there was no climactic low.

The FOMC meets this coming week to push interest rates a little higher; the markets' response to that will be interesting.

The strongest sectors last week were Utilities and Telecomm while the weakest were Energy and Biotech.

I expect the major averages to be lower on Friday, November 4 than they were on Friday, October 28.

Last week's negative forecast was a miss.

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