The good news is:

• There are some breadth non confirmations of the recent lows.

The Negatives

• The market is overbought.

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 vertical lines have been drawn on the 1st trading day of each month.  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 turned upward, but, remains in deeply negative territory. 

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 is also in deeply negative territory,

The Positives

The possible non confirmations I mentioned last week did materialize.

New lows declined last week, unfortunately they still vastly outnumbered by new highs.

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 did not confirm the new cycle price low for the SPX.  

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.

Seasonality

Next week includes the last 4 trading days of June and the 1st trading day of July during the 2nd 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 2nd year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been mixed.

Report for the last 4 days of June and first day of July.

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)

               Day4      Day3      Day2      Day1      Day1      Totals

 1966-2      -0.34% 1  -0.49% 2  -1.21% 3  -0.96% 4  -0.10% 5    -3.10%

 1970-2      -0.34% 4  -1.10% 5  -1.27% 1  -1.15% 2  -1.30% 3    -5.17%

 1974-2       0.60% 2  -1.36% 3  -1.84% 4  -1.13% 5  -0.75% 1    -4.49%

 1978-2      -0.30% 2   0.29% 3   0.38% 4   0.27% 5  -0.12% 1     0.51%


 1982-2      -0.37% 5   0.35% 1  -0.32% 2   0.45% 3  -0.41% 4    -0.30%

 1986-2       0.83% 3   0.16% 4   0.16% 5   0.49% 1   0.52% 2     2.16%

 1990-2      -0.06% 2   0.33% 3   0.76% 4   0.41% 5  -0.05% 1     1.40%

 1994-2       1.28% 1  -0.09% 2   0.28% 3   0.28% 4   0.13% 5     1.87%

 1998-2      -0.77% 4   0.33% 5   1.16% 1   0.19% 2   1.05% 3     1.96%


 Avg          0.18%     0.22%     0.41%     0.36%     0.25%       1.42%


 2002-2      -2.49% 2   0.38% 3   2.09% 4   0.27% 5  -4.06% 1    -3.81%

 2006-2      -1.57% 2   0.55% 3   2.96% 4  -0.11% 5   0.84% 1     2.69%

 2010-2       0.27% 5  -0.13% 1  -3.85% 2  -1.21% 3  -0.37% 4    -5.29%

 2014-2       0.68% 3  -0.02% 4   0.43% 5   0.23% 1   1.14% 2     2.47%

 2018-2       0.39% 2  -1.54% 3   0.79% 4   0.09% 5   0.76% 1     0.49%


 Avg         -0.54%    -0.15%     0.48%    -0.14%    -0.34%      -0.69%


OTC summary for PY2 1966 - 2018

Averages     -0.16%    -0.17%     0.04%    -0.13%    -0.20%      -0.61%

% Winners       43%       50%       64%       64%       43%         57%

MDD  7/1/2010  5.49% --  7/1/1970  5.06% --  7/1/1974  4.99%


OTC summary for all years 1963 - 2021

Averages     -0.08%     0.07%     0.12%     0.30%     0.17%       0.58%

% Winners       46%       56%       64%       64%       64%         71%

MDD 7/1/2010  5.49% --  7/1/1970  5.06% --  7/1/1974  4.99%


SPX PY2

               Day4      Day3      Day2      Day1      Day1      Totals

 1930-2       2.35% 4  -0.95% 5   0.45% 6   2.81% 1  -1.08% 2     3.60%

 1934-2      -0.30% 3   0.50% 4  -1.70% 5   0.00% 6  -1.22% 1    -2.72%

 1938-2      -1.14% 1  -0.09% 2   4.18% 3  -1.37% 4   3.03% 5     4.61%


 1942-2       0.12% 5   0.24% 6   0.36% 1   0.24% 2  -0.84% 3     0.13%

 1946-2      -0.71% 2  -0.17% 3   1.55% 4   0.22% 5   0.60% 1     1.48%

 1950-2      -1.10% 2   1.12% 3  -3.70% 4   1.43% 5  -0.28% 1    -2.54%

 1954-2      -0.21% 5   0.27% 1   0.51% 2  -0.75% 3   0.00% 4    -0.17%

 1958-2       0.25% 3   0.47% 4   0.13% 5   0.76% 1   0.09% 2     1.70%


 Avg         -0.33%     0.39%    -0.23%     0.38%    -0.09%       0.12%


 1962-2      -0.25% 2   0.54% 3   3.44% 4   0.62% 5   2.03% 1     6.38%

 1966-2      -0.58% 1  -0.48% 2  -0.95% 3  -0.14% 4   1.03% 5    -1.11%

 1970-2       0.07% 4  -0.74% 5  -0.79% 1  -0.23% 2   0.44% 3    -1.26%

 1974-2       1.47% 2  -1.47% 3  -1.55% 4  -0.36% 5   0.02% 1    -1.89%

 1978-2       0.40% 2   0.44% 3   0.18% 4  -0.04% 5  -0.46% 1     0.52%


 Avg          0.22%    -0.34%     0.07%    -0.03%     0.61%       0.53%


 1982-2      -0.63% 5   1.03% 1  -0.05% 2  -0.54% 3  -0.82% 4    -1.01%

 1986-2       0.77% 3  -0.08% 4   0.35% 5   0.50% 1   0.48% 2     2.01%

 1990-2      -0.07% 2   0.87% 3   0.70% 4   0.11% 5   0.42% 1     2.04%

 1994-2       1.02% 1  -0.28% 2   0.35% 3  -0.75% 4   0.43% 5     0.77%

 1998-2      -0.32% 4   0.35% 5   0.47% 1  -0.41% 2   1.31% 3     1.39%


 Avg          0.15%     0.38%     0.36%    -0.22%     0.36%       1.04%


 2002-2      -1.67% 2  -0.27% 3   1.76% 4   0.00% 5  -2.22% 1    -2.40%

 2006-2      -0.91% 2   0.55% 3   2.16% 4  -0.21% 5   0.79% 1     2.37%

 2010-2       0.29% 5  -0.20% 1  -3.10% 2  -1.01% 3  -0.32% 4    -4.35%

 2014-2       0.49% 3  -0.12% 4   0.19% 5  -0.04% 1   0.67% 2     1.19%

 2018-2       0.22% 2  -0.86% 3   0.62% 4   0.08% 5   0.31% 1     0.36%


 Avg         -0.32%    -0.18%     0.32%    -0.24%    -0.16%      -0.57%


SPX summary for PY2 1930 - 2018

Averages     -0.02%     0.03%     0.24%     0.04%     0.19%       0.48%

% Winners       48%       48%       70%       39%       61%         61%

MDD  7/1/2010  4.59% --  6/29/1950  3.70% --  6/28/1974  3.35%


SPX summary for all years 1928 - 2021

Averages     -0.01%    -0.06%     0.13%     0.17%     0.33%       0.56%

% Winners       46%       51%       59%       60%       73%         61%

MDD 7/1/2010  4.59% --  6/29/1939  4.43% --  6/30/1931  4.32%


July

Since 1963, over all years, the OTC in July has been up 56% of the time with an average gain of 0.7%.  During the 2nd year of the Presidential Cycle the OTC in July has been up 36% of the time with an average loss of (-1.3%).  The best July ever for the OTC was 1997 (+10.5%), the worst 2002 (-9.2%).

The average month has 21 trading days.  The chart below has been calculated by averaging the daily percentage change for each of the 1st 11 trading days and each of the last 10.  In months when there were more than 21 trading days some of the days in the middle were not counted.  In months when there were less than 21 trading days some of the days in the middle of the month were counted twice.  Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that.  The line is solid on the 11th trading day, the dividing point.

In the chart below the blue line shows the average daily performance of the OTC in July over all years since 1963, while the grey line shows the average during the 2nd year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 60% of the time in July with an average gain of 1.6%.  During the 2nd year of the Presidential Cycle the SPX has been up 57% of the time with an average gain of 0.7%.  The best July ever for the SPX was 1932 (+37.7%) the worst 1934 (-11.5%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in July in red and the average daily performance during the 2nd year of the Presidential Cycle, over the same period, in grey.

Since 1979 the Russell 2000 (R2K) has been up 51% of the time in July with an average loss of -0.2%.  During the 2nd year of the Presidential Cycle the R2K has been up 30% of the time with an average loss of (-3.8%), helped considerably by a 15.2% loss in 2002.  The best July ever for the R2K, 1980 (+11.0%), the worst 2002 (-15.2%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in July in magenta and the average daily performance during the 2nd year of the Presidential Cycle in grey.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 63% of the time in July with an average gain of 1.2%.  During the 2nd year of the Presidential Cycle the DJIA has been up 59% of the time in July with an average gain of 0.8%.  The best July ever for the DJIA 1932 (+26.7%), the worst 1893 (-15.7%)

The chart below is similar to those above except it shows the average daily performance over all years for the DJIA in July in light grey and the average performance during the 2nd year of the Presidential Cycle in dark grey.

Conclusion

The market had a good week; there are some non confirmations of the lows a week ago. 

Last week the performance of the major indices was:

DJIA +5.26%

SPX +6.68%

OTC +9.03%

Russell 2000 +7.02%

The market is overbought.

Seasonality for next week is mixed.

The strongest sectors last week were Internet and Telecom while the weakest were Energy and Precious Metals.

I expect the major averages to be lower on Friday July 1 than they were on Friday June 24.

Last week's negative forecast was a miss.