The good news is:

• Both the S&P 500 (SPX) and Dow Jones Industrial average (DJIA) closed at or near their all time highs last week.

 

The Negatives

Summation indices are running totals of oscillator values.

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

The first chart covers the past 6 months showing the S&P 500 (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.  Dashed vertical lines have been drawn on the 1^st trading day of each month.

Finally some clarity; all of the SI Mom’s are at the bottom of the chart.

(Click on image to enlarge)

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.  

Ditto NASDAQ SI’s. 

(Click on image to enlarge)

The next chart covers the last 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.  

NY NH did not confirm the SPX high.

(Click on image to enlarge)

The next chart is similar to the one above except it shows the OTC in blue and OTC NH, in green, has been calculated with NASDAQ data.

OTC NH continued to fall while the index rose.

(Click on image to enlarge)

The next chart covers the last 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 slightly downward while prices rose.

(Click on image to enlarge)

 

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.

Ditto NY NL.

(Click on image to enlarge)

 

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 bounced around finishing the week slightly above the neutral line,

(Click on image to enlarge)

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 fell, but remained in positive territory. 

(Click on image to enlarge)

 

Seasonality

Next week includes the 5 trading days prior to the 3^rd Friday of January 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 1953 to 2023.  There are summaries for both the 4^th 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.

Average returns for the coming week have been mixed but, mostly positive.

 

Report for the week before the 3rd Friday of January.

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

Daily returns from Monday through 3rd Friday.

 

OTC Presidential Year 4 (PY4)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1964-4  -0.19%   0.14%   0.38%   0.14%  -0.22%   0.25%

 1968-4   0.43%   0.18%  -0.85%   0.36%   0.16%   0.28%

 1972-4   0.16%   0.62%  -0.18%  -0.11%  -0.09%   0.40%

 1976-4   0.49%  -1.56%   2.00%   0.13%   0.68%   1.74%

 1980-4   0.34%   0.36%   0.66%  -0.12%   0.21%   1.47%

 

 Avg      0.25%  -0.05%   0.40%   0.08%   0.15%   0.83%

 

 1984-4  -0.20%   0.20%   0.12%  -0.25%  -0.73%  -0.85%

 1988-4   0.11%  -0.05%  -1.96%   0.17%   1.00%  -0.73%

 1992-4   0.31%   1.31%   0.81%  -0.55%  -0.08%   1.81%

 1996-4  -1.95%   0.74%   0.24%   0.89%   1.12%   1.05%

 2000-4   0.00%   1.64%   0.50%   0.92%   1.10%   4.15%

 

 Avg     -0.43%   0.77%  -0.06%   0.24%   0.48%   1.09%

 

 2004-4   1.19%  -0.73%   0.70%  -0.10%   1.49%   2.56%

 2008-4   1.57%  -2.00%  -0.95%  -1.99%  -0.29%  -3.66%

 2012-4   0.00%   0.64%   1.53%   0.67%  -0.06%   2.78%

 2016-4   0.00%  -0.26%  -0.12%   0.01%   2.00%   1.64%

 2020-4   1.04%  -0.24%   0.08%   1.06%   0.34%   2.27%

 

 Avg      1.27%  -0.52%   0.25%  -0.07%   0.70%   1.12%

 

OTC summary for PY4 1964 - 2020 

 Avg      0.28%   0.07%   0.20%   0.08%   0.44%   1.01%

 Win%       75%     60%     67%     60%     60%     80%

 

OTC summary for all years 1963 - 2023

 Avg     -0.02%   0.21%   0.07%   0.16%   0.12%   0.54%

 Win%       58%     57%     59%     64%     61%     69%

 

SPX PY4

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1956-4  -1.19%   0.75%  -0.67%  -1.02%  -1.14%  -3.28%

 1960-4  -0.84%  -1.07%  -0.35%   0.25%   0.30%  -1.72%

 

 1964-4  -0.03%   0.18%   0.37%  -0.12%   0.01%   0.42%

 1968-4  -0.31%  -0.62%  -0.19%  -0.08%  -0.33%  -1.54%

 1972-4   0.30%   0.34%  -0.16%   0.00%  -0.22%   0.25%

 1976-4   1.45%  -0.79%   1.63%  -0.54%   0.40%   2.17%

 1980-4   0.42%   0.69%  -0.08%  -0.32%   0.33%   1.05%

 

 Avg      0.37%  -0.04%   0.31%  -0.26%   0.04%   0.47%

 

 1984-4   0.10%   0.39%  -0.17%  -0.30%  -0.50%  -0.48%

 1988-4  -0.07%  -1.02%  -2.00%   0.21%   1.38%  -1.49%

 1992-4  -0.18%   1.47%   0.08%  -0.61%   0.16%   0.91%

 1996-4  -0.33%   1.44%  -0.34%   0.31%   0.59%   1.66%

 2000-4   0.00%  -0.69%   0.05%  -0.71%  -0.29%  -1.63%

 

 Avg     -0.12%   0.32%  -0.47%  -0.22%   0.27%  -0.21%

 

 2004-4   0.48%  -0.53%   0.83%   0.14%   0.69%   1.60%

 2008-4   1.09%  -2.00%  -0.56%  -2.00%  -0.60%  -4.08%

 2012-4   0.00%   0.36%   1.11%   0.49%   0.07%   2.03%

 2016-4   0.00%   0.05%  -1.17%   0.52%   2.00%   1.40%

 2020-4   0.70%  -0.15%   0.19%   0.84%   0.39%   1.96%

 

 Avg      0.75%  -0.46%   0.08%   0.00%   0.51%   0.58%

 

 SPX summary for PY4 1956 - 2020

 Avg      0.11%  -0.07%  -0.08%  -0.18%   0.19%  -0.05%

 Win%       50%     53%     41%     44%     65%     59%

 

SPX summary for all years 1953 - 2023

 Avg     -0.08%   0.10%  -0.03%   0.02%  -0.02%   0.01%

 Win%       44%     58%     55%     57%     56%     51%

 

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart, made with FastTrack, covers the past 4 years showing the SPX in red and M2 money supply in green.

Money supply has remained constant for several months.

(Click on image to enlarge)

 

Treasury rates at their close last Friday and their changes from last month:

2yr yield 4.136% down from 4.336%

5yr yield 3.832% down from 3.872%

10yr yield 3.944% up from 3.897% 

30yr yield 4.177% up from 4.052%

All the rates are inverted (shorter term maturities yield more than longer term maturities) relative to the 2 year; everything else is no longer inverted.  However, shorter term rates have been falling while longer term rates have been rising.

The next chart covers the past 15 months showing the 30 year yield over the 5 year yield on top, The 1, 2, 5, 10 & 30 year treasury rates in the middle group and the SPX with a 50 day simple moving average on the bottom.

(Click on image to enlarge)

Conclusion

The blue chip indices rose last week while the breadth indicators deteriorated.

The strongest sectors last week were Health care and Technology while the weakest were Energy and Banks.

I expect the major averages to be lower on Friday January 19 than they were on Friday January 12. 

Last week the blue chip indices rose while the Russell 2000 fell slightly; so I am calling last weeks positive forecast a tie.

 

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