The good news is:

• Both the S&P 500 (SPX) and Dow Jones Industrial average (DJIA) closed at time highs last Friday.  And Nasdaq composite (OTC) closed at a multi year high last Friday.

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 1st trading day of each month.

All of the SI Mom’s are at the bottom of the chart.

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

Ditto Nasdaq SI’s. 

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 new SPX high.

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 also failed to confirm the multi year index high.

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 continued falling as the index rose.

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.

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 into negative territory last week,

The Positives

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 last week, but remained in positive territory. 

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of January during the 4th 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 4th 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 and weaker during the 4th year of the Presidential Cycle than other years.

Report for the week before the 4th Friday of January.

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

Daily returns from Monday through the 4th Friday.


OTC Presidential Year 4 (PY4)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1964-4   0.00%  -0.76%   0.14%  -0.22%   0.36%  -0.49%


 Avg      0.00%  -0.76%   0.14%  -0.22%   0.36%  -0.49%


 1968-4   0.00%  -0.94%  -0.72%  -0.08%  -0.34%  -2.08%

 1972-4  -0.61%  -0.16%   0.08%   0.84%   0.91%   1.05%

 1976-4   0.51%   0.20%   0.06%  -0.39%   0.76%   1.14%

 1980-4   0.77%  -0.27%   1.01%   0.47%   0.29%   2.26%

 1984-4  -1.48%  -0.49%  -0.53%  -0.63%  -0.88%  -4.01%


 Avg     -0.20%  -0.33%  -0.02%   0.04%   0.15%  -0.33%


 1988-4   0.86%  -0.38%   0.17%   0.75%   0.67%   2.08%

 1992-4  -1.19%  -2.00%   2.00%   0.35%   0.29%  -0.55%

 1996-4   1.07%  -0.14%   1.51%  -0.72%   0.48%   2.21%

 2000-4  -2.00%   1.74%  -2.00%  -0.74%  -2.00%  -5.00%

 2004-4   0.00%   0.35%  -0.26%  -1.09%   0.23%  -0.77%


 Avg     -0.31%  -0.08%   0.28%  -0.29%  -0.06%  -0.41%


 2008-4   0.00%  -2.00%   1.05%   1.92%  -1.47%  -0.50%

 2012-4  -0.09%   0.09%   1.14%  -0.46%   0.40%   1.07%

 2016-4  -1.58%   1.09%  -2.00%   0.86%   2.00%   0.37%

 2020-4   0.00%  -0.19%   0.14%   0.20%  -0.93%  -0.79%

 

OTC summary for PY4 1964 - 2020

 Avg     -0.37%  -0.26%   0.12%   0.07%   0.05%  -0.27%

 Win%       40%     33%     67%     47%     67%     47%


OTC summary for all years 1963 - 2023

 Avg     -0.03%  -0.04%   0.13%   0.14%   0.11%   0.31%

 Win%       55%     48%     58%     49%     68%     60%


SPX PY4

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1956-4  -0.25%   1.25%   0.16%  -0.59%  -0.25%   0.31%

 1960-4  -1.05%   0.14%  -0.25%  -1.04%  -0.93%  -3.12%


 1964-4  -0.20%   0.27%   0.54%   0.08%   0.03%   0.72%

 1968-4  -1.27%  -0.39%  -0.52%   0.14%   0.16%  -1.89%

 1972-4  -1.04%   0.20%  -0.27%   0.98%   0.64%   0.50%

 1976-4   1.36%   0.55%  -0.63%  -0.20%   1.19%   2.27%

 1980-4   0.93%  -0.53%   1.73%   0.23%  -0.08%   2.28%


 Avg     -0.04%   0.02%   0.17%   0.24%   0.39%   0.78%


 1984-4  -0.81%   0.65%  -0.66%  -0.36%  -0.18%  -1.37%

 1988-4   2.00%  -1.03%  -0.08%   1.57%   1.49%   3.95%

 1992-4  -0.60%  -0.89%   1.33%  -0.76%   0.13%  -0.79%

 1996-4   0.26%  -0.10%   1.17%  -0.47%   0.74%   1.60%

 2000-4  -2.00%   0.58%  -0.42%  -0.39%  -2.00%  -4.23%


 Avg     -0.23%  -0.16%   0.27%  -0.08%   0.04%  -0.17%


 2004-4   0.00%  -0.09%   0.78%  -0.32%  -0.21%   0.15%

 2008-4   0.00%  -1.11%   2.00%   1.01%  -1.59%   0.31%

 2012-4   0.05%  -0.10%   0.87%  -0.58%  -0.16%   0.08%

 2016-4  -1.56%   1.41%  -1.09%   0.55%   2.00%   1.32%

 2020-4   0.00%  -0.27%   0.03%   0.11%  -0.90%  -1.03%


 Avg     -0.76%  -0.03%   0.52%   0.16%  -0.17%   0.17%


SPX summary for PY4  1956 - 2020

 Avg     -0.30%   0.03%   0.28%   0.00%   0.00%   0.06%

 Win%       36%     47%     53%     47%     47%     65%


SPX summary for all years 1953 - 2023

 Avg     -0.06%   0.05%   0.12%   0.13%   0.04%   0.29%

 Win%       53%     58%     56%     60%     54%     65%

Conclusion

For the 2nd week in a row the blue chip indices rose while the breadth indicators deteriorated.

The strongest sectors last week were Telecomm and Technology while the weakest were Energy (for the 2nd week) and Utilities.

I expect the major averages to be lower on Friday, January 26 than they were on Friday, January 19. 

Last week the blue chip indices rose while the Russell 2000 fell; so I am calling last week's negative forecast a tie.

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