Technical market report for November 28, 2020

The good news is the Dow Jones Industrial Average closed at an all time high last Tuesday; the NASDAQ composite (OTC), S&P 500 (SPX), and Russell 2000 all closed at all time highs last Friday.

The Negatives

Short term negatives are hard to find. New Highs could be better, but they have been improving.

The Positives

New lows are nearly non-existent and the secondaries have been outperforming the blue chips.

The first chart covers the past six 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. The OTC NH moved sharply upward last week.

The next chart is similar to the first one, except it shows the SPX in red and the NY NH in green. The information has been calculated with NYSE data. The NY NH also moved sharply upward last week.

The next chart covers the past six months, showing the SPX in red and a 40% trend (four-day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio) in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level. At 99%, the NY HL Ratio cannot get much higher.

The next chart is similar to the one above, except it shows the OTC in blue and the OTC HL Ratio in red. The information has been calculated with NASDAQ data. At 96%, the OTC HL Ratio is also near its upper limit.

Seasonality

Next week includes the last trading day of November and the first four trading days of December during the fourth year of the Presidential Cycle. The tables below show the daily change on a percentage basis for that period.

The OTC data covers the period from 1963 to 2019, while the SPX data runs from 1928 to 2019. There are summaries for both the fourth year of the Presidential Cycle, and all years combined. Average returns for the coming week have been mostly positive. 

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 4 (PY4)

•     Year     Day1     Day1      Day2      Day3     Day4     Totals
•  1964-4 -0.36% 1 -0.64% 2 -0.82% 3 0.69% 4 -0.02% 5 -1.15%
•  1968-4 0.68% 5 0.52% 1 1.75% 2 0.10% 4 0.24% 5 3.30%
•  1972-4 0.17% 4 0.74% 5 0.15% 1 0.10% 2 0.30% 3 1.46%
•  1976-4 0.04% 2 0.78% 3 0.01% 4 0.51% 5 0.35% 1 1.69%
•  1980-4 0.53% 5 -1.56% 1 -0.59% 2 0.58% 3 0.63% 4 -0.40%
•  1984-4 -0.32% 5 -0.67% 1 0.02% 2 -0.90% 3 0.12% 4 -1.75%
•  1988-4 0.90% 3 0.65% 4 0.01% 5 0.40% 1 0.42% 2 2.38%
•  1992-4 0.50% 1 0.19% 2 -0.16% 3 0.53% 4 0.80% 5 1.85%
•  1996-4 0.41% 5 0.56% 1 0.05% 2 -0.26% 3 0.24% 4 0.99%
•  Avg  --  0.40%   -0.17%   -0.13%    0.07%   0.44%    0.62%
•  2000-4 -4.03% 4 1.82% 5 -1.12% 1 10.47% 2 -3.23% 3 3.93%
•  2004-4 -0.48% 2 1.98% 3 0.25% 4 0.20% 5 0.15% 1 2.11%
•  2008-4 0.23% 5 -8.95% 1 3.70% 2 2.94% 3 -3.14% 4 -5.23%
•  2012-4 -0.06% 5 -0.27% 1 -0.18% 2 -0.77% 3 0.52% 4 -0.75%
•  2016-4 -1.05% 3 -1.36% 4 0.09% 5 1.01% 1 0.45% 2 -0.85%
•  Avg --    -1.08%   -1.36%    0.55%    2.77%   -1.05%    -0.16%

OTC summary for PY4 1964 - 2016

• Averages -- -0.20% -0.44% 0.23% 1.12% -0.15% 0.54%
• % Winners --   57%     57%     64%     79%     79%    57%
• MDD 12/1/2008: 8.95% -- 11/30/2000: 4.03% -- 12/1/2016: 2.39%

OTC summary for all years 1963 - 2019

• Averages --  -0.01% 0.14% 0.08% 0.41% -0.03% 0.58%
• % Winners --    63%    60%    60%    68%    56%     60%
• MDD 12/1/2008: 8.95% -- 12/4/1987: 7.44% -- 12/5/1974: 6.40%

SPX PY4

•     Year     Day1      Day1      Day2     Day3      Day4    Totals
•  1928-4 0.37% 5 -1.03% 6 -0.75% 1 0.25% 2 -0.42% 3 -1.57%
•  1932-4 -3.39% 3 2.75% 4 -3.86% 5 -0.15% 6 1.24% 1 -3.42%
•  1936-4 -0.52% 1 -0.81% 2 -1.11% 3 0.53% 4 -0.18% 5 -2.08%
•  1940-4 0.38% 6 0.09% 1 -0.38% 2 0.00% 3 -0.66% 4 -0.57%
•  1944-4 -0.16% 4 -0.23% 5 0.23% 6 0.62% 1 0.39% 2 0.86%
•  1948-4 -0.27% 2 1.76% 3 -0.07% 4 0.87% 5 0.79% 6 3.09%
•  1952-4 0.55% 5 0.08% 1 0.23% 2 -0.12% 3 -0.39% 4 0.35%
•  1956-4 1.58% 5 2.00% 1 -0.30% 2 1.20% 3 0.91% 4 5.37%
•  Avg --   0.42%    0.74%   -0.06%    0.51%    0.21%     1.82%
•  1960-4 -0.52% 3 -0.43% 4 0.16% 5 -0.14% 1 0.29% 2 -0.64%
•  1964-4 -0.87% 1 -1.03% 2 0.29% 3 0.47% 4 0.20% 5 -0.94%
•  1968-4 0.57% 5 -0.23% 1 -0.09% 2 -0.32% 4 0.24% 5 0.16%
•  1972-4 0.13% 4 0.61% 5 0.33% 1 -0.16% 2 0.37% 3 1.27%
•  1976-4 -0.33% 2 0.38% 3 -0.36% 4 0.63% 5 0.78% 1 1.09%
•  Avg --   -0.21%   -0.14%    0.07%    0.09%    0.38%     0.19%
•  1980-4 0.25% 5 -2.36% 1 -0.17% 2 -0.19% 3 -0.17% 4 -2.64%
•  1984-4 -0.20% 5 -0.46% 1 0.34% 2 -0.78% 3 0.41% 4 -0.70%
•  1988-4 1.03% 3 -0.44% 4 -0.25% 5 1.15% 1 0.97% 2 2.45%
•  1992-4 0.28% 1 -0.13% 2 -0.21% 3 0.00% 4 0.50% 5 0.44%
•  1996-4 0.27% 5 -0.06% 1 -1.09% 2 -0.42% 3 -0.10% 4 -1.41%
•  Avg --   0.32%    -0.69%    -0.28%    -0.05%     0.32%    -0.37%
•  2000-4 -2.01% 4 0.02% 5 0.74% 1 3.89% 2 -1.82% 3 0.82%
•  2004-4 -0.40% 2 1.50% 3 -0.09% 4 0.07% 5 -0.08% 1 1.00%
•  2008-4 0.96% 5 -8.93% 1 3.99% 2 2.58% 3 -2.93% 4 -4.32%
•  2012-4 0.02% 5 -0.47% 1 -0.17% 2 0.16% 3 0.33% 4 -0.14%
•  2016-4 -0.27% 3 -0.35% 4 0.04% 5 0.58% 1 0.34% 2 0.35%
•  Avg --   -0.34%   -1.65%    0.90%    1.46%   -0.83%    -0.46%

SPX summary for PY4 1928 - 2016

• Averages -- -0.11% -0.34% -0.11% 0.47% 0.04% -0.05%
• % Winners  --  52%     39%     39%    61%    61%    52%
• MDD 12/1/2008: 8.93% -- 12/3/1932: 4.72% -- 12/4/1980: 2.88%

SPX summary for all years 1928 - 2019

• Averages --  0.19% -0.02% 0.08% 0.23% 0.06% 0.54%
• % Winners --   55%     49%    54%     63%    53%   65%
• MDD 12/1/2008: 8.93% -- 12/4/1987: 6.83% -- 12/7/2018: 5.64%

December

Since 1963, over all years, the OTC in December has been up 61% of the time with an average gain of 1.6%. During the fourth year of the Presidential Cycle, December has been up 71% time with an average gain of 1.2%. The best December ever for the OTC was 1999 (+22.0%), and the worst was 2002 (-9.7%).

The average month has 21 trading days. The charts below have been calculated by averaging the daily percentage change of the OTC for each of the first 11 trading days and each of the last 10. In months where 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 first trading day and at five trading day intervals after that. The line is solid on the eleventh trading day, the dividing point.

In the chart below, the blue line shows the average of the OTC in December over all years since 1963, while the green line shows the average during the fourth year of the Presidential Cycle over the same period.

Since 1928, the SPX has been up 73% of the time in December with an average gain of 1.3%. During the fourth year of the Presidential Cycle, the SPX has been up 78% of the time with an average gain of 1.4%. The best December ever for the SPX was 1991 (+11.1%), and the worst was 1931 (-14.5%).

The chart below is similar to the one above, except it shows the average daily performance over all years for the SPX in December in red, and the performance during the fourth year of the Presidential Cycle in green.

Since 1979, the Russell 2000 (R2K) has been up 76% of the time in December with an average gain of 2.2%. During the fourth year of the Presidential Cycle, the R2K has been up 90% of the time (1980 has been its only down year) with an average gain of 3.0%. The best December ever for the R2K was 1999 (+11.2%), the worst was 2002 (-5.7%).

The chart below is similar to those above, except it shows the daily performance over all years of the R2K in December in magenta, and the performance during the fourth year of the Presidential Cycle in green.

Since 1885, the Dow Jones Industrial Average (DJIA) has been up 69% of the time in December with an average gain of 1.2%. During the fourth year of the Presidential Cycle, the DJIA has been up 61% of the time in December with an average gain of 0.9%. The best December ever for the DJIA was 1903 (+10.8%),and the worst was 1931 (-17.0%).

The chart below is similar to those above, except it shows the daily performance over all years of the DJIA in December in grey, and the performance during the fourth year of the Presidential Cycle in green.

Conclusion

The market had another good week. New highs increased while new lows remained insignificant, and the secondaries outperformed the blue chips. The strongest sectors last week were technology and banks, and the weakest were utilities and precious metals. 

I expect the major averages to be higher on Friday, December 4 than they were on Friday, November 27.