Technical Market Report For Saturday, Oct. 24
The good news is the secondaries, as measured by the Russell 2000 (R2K) outperformed the blue chips, as measured by the S&P 500 (SPX).
The Negatives
Nothing short term; total stock market capitalization is near an all time record while the economy supporting it is off its all time high.
The Positives
The first chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.
NY NH is a little off its recent high; not surprising for a down week.
In case the chart above gave you feelings of unrestrained glee, the next chart covers the past year and should help you control your “irrational exuberance”.
The next chart is similar to the first one except it shows the NASDAQ composite (OTC) in blue and OTC NH, in green has been calculated with NASDAQ data.
OTC NH has been trending downward for the past two months.
To be consistent, the next chart, like the second one, covers the past year.
The pattern is similar.
The next chart covers the past six months showing the SPX in red and a 40% trend (4 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.
NY HL Ratio fell again last week to a still comfortable 75%.
The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated with NASDAQ data.
OTC HL Ratio also declined a bit to 70%; still comfortably positive.
Seasonality
Next week includes the last five trading days of October during the fourth 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 2019 while 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 positive by all measures.
Report for the last 5 days of October.
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)
Day5 Day4 Day3 Day2 Day1 Totals
1964-4 0.00% 1 -0.07% 2 0.11% 3 -0.11% 4 0.14% 5 0.07%
1968-4 -0.63% 4 -0.76% 5 -0.32% 1 -0.75% 2 -0.68% 4 -3.14%
1972-4 -0.02% 3 0.37% 4 0.12% 5 -0.05% 1 0.60% 2 1.03%
1976-4 0.12% 1 0.06% 2 0.22% 3 0.26% 4 0.56% 5 1.22%
1980-4 -0.93% 1 -0.30% 2 0.38% 3 -1.02% 4 0.14% 5 -1.73%
1984-4 -0.73% 4 -0.65% 5 -0.36% 1 0.39% 2 -0.17% 3 -1.52%
1988-4 -0.29% 2 -0.24% 3 -0.89% 4 0.27% 5 -0.09% 1 -1.23%
1992-4 0.27% 1 -0.33% 2 0.74% 3 0.74% 4 -0.11% 5 1.32%
1996-4 -0.36% 5 -0.55% 1 -1.05% 2 0.26% 3 1.27% 4 -0.43%
Avg -0.41% -0.41% -0.24% 0.13% 0.21% -0.72%
2000-4 -5.56% 3 1.32% 4 0.19% 5 -2.65% 1 5.58% 2 -1.12%
2004-4 -0.06% 1 0.77% 2 2.14% 3 0.29% 4 -0.04% 5 3.10%
2008-4 -2.97% 1 9.53% 2 0.47% 3 2.49% 4 1.32% 5 10.84%
2012-4 -0.88% 2 -0.29% 3 0.15% 4 0.06% 5 -0.36% 3 -1.32%
2016-4 -0.50% 2 -0.63% 3 -0.65% 4 -0.50% 5 -0.02% 1 -2.29%
Avg -1.99% 2.14% 0.46% -0.06% 1.30% 1.84%
OTC summary for PY4 1964 - 2016
Averages -0.89% 0.59% 0.09% -0.02% 0.58% 0.34%
% Winners 14% 36% 64% 57% 50% 43%
MDD 10/30/2000 6.68% -- 10/31/1968 3.10% -- 10/27/2008 2.97%
OTC summary for all years 1963 - 2019
Averages -0.44% 0.18% -0.06% 0.26% 0.44% 0.38%
% Winners 41% 42% 60% 54% 65% 54%
MDD 10/28/1987 11.13% -- 10/31/1978 8.29% -- 10/27/1997 7.01%
SPX PY4
Day5 Day4 Day3 Day2 Day1 Totals
1928-4 -1.19% 5 1.02% 6 0.59% 1 -1.09% 2 -0.37% 3 -1.03%
1932-4 1.92% 3 0.87% 4 2.01% 5 -1.27% 6 -0.57% 1 2.97%
1936-4 1.68% 2 0.06% 3 1.53% 4 0.17% 5 -0.12% 6 3.33%
1940-4 1.12% 6 -0.37% 1 0.19% 2 0.83% 3 1.47% 4 3.23%
1944-4 -0.78% 4 0.16% 5 0.31% 6 -0.23% 1 0.16% 2 -0.39%
1948-4 0.06% 2 -0.12% 3 -0.66% 4 0.24% 5 0.24% 6 -0.24%
1952-4 0.25% 1 0.17% 2 0.08% 3 0.00% 4 1.53% 5 2.03%
1956-4 -0.17% 4 0.92% 5 0.28% 1 -0.06% 2 -1.70% 3 -0.75%
Avg 0.09% 0.15% 0.04% 0.15% 0.34% 0.78%
1960-4 -0.76% 2 1.43% 3 1.07% 4 -0.39% 5 -0.04% 1 1.32%
1964-4 -0.16% 1 0.00% 2 -0.36% 3 0.05% 4 0.15% 5 -0.33%
1968-4 -0.70% 4 0.35% 5 -0.29% 1 -0.58% 2 0.11% 4 -1.11%
1972-4 -0.08% 3 0.24% 4 -0.33% 5 -0.03% 1 0.90% 2 0.70%
1976-4 0.11% 1 0.99% 2 0.69% 3 -0.15% 4 1.27% 5 2.91%
Avg -0.32% 0.60% 0.16% -0.22% 0.48% 0.70%
1980-4 -1.52% 1 0.13% 2 -0.11% 3 -1.27% 4 0.93% 5 -1.83%
1984-4 -0.53% 4 -0.61% 5 -0.31% 1 1.25% 2 -0.45% 3 -0.65%
1988-4 0.04% 2 -0.35% 3 -1.46% 4 0.45% 5 0.16% 1 -1.17%
1992-4 0.98% 1 0.08% 2 0.39% 3 0.17% 4 -0.52% 5 1.11%
1996-4 -0.19% 5 -0.52% 1 0.61% 2 -0.09% 3 0.62% 4 0.43%
Avg -0.25% -0.26% -0.18% 0.10% 0.15% -0.42%
2000-4 -2.38% 3 -0.03% 4 1.11% 5 1.38% 1 2.20% 2 2.28%
2004-4 -0.08% 1 1.49% 2 1.29% 3 0.18% 4 0.24% 5 3.12%
2008-4 -3.18% 1 10.79% 2 -1.11% 3 2.58% 4 1.54% 5 10.62%
2012-4 -1.44% 2 -0.31% 3 0.30% 4 -0.07% 5 0.03% 3 -1.50%
2016-4 -0.38% 2 -0.17% 3 -0.30% 4 -0.31% 5 -0.01% 1 -1.18%
Avg -1.49% 2.35% 0.26% 0.75% 0.80% 2.67%
SPX summary for PY4 1928 - 2016
Averages -0.32% 0.70% 0.24% 0.08% 0.34% 1.04%
% Winners 35% 61% 61% 43% 65% 52%
MDD 10/27/2008 3.18% -- 10/30/1980 2.74% -- 10/26/2000 2.41%
SPX summary for all years 1928 - 2019
Averages -0.46% 0.12% -0.03% 0.38% 0.21% 0.22%
% Winners 36% 59% 52% 57% 57% 57%
MDD 10/29/1929 21.78% -- 10/26/1987 8.28% -- 10/31/1933 6.96%
Conclusion
Seasonally, next week has been modestly positive. Not much is likely to happen prior to the election.
The strongest sectors last week were Banks and Utilities the weakest were Telecom and Precious Metals.
I expect the major averages to be higher on Friday, October 30, than they were on Friday, October 23.
Last week the Russell 2000 was up slightly while the other major indices were down slightly. I am calling last week's negative forecast a tie.
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