The good news is new lows are hard to find.

The Negatives

Both new highs and new lows are hard to find.

The first chart covers the past six months, showing the NASDAQ composite (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.

After a minor, short-term non-confirmation of the OTC high, the OTC NH New highs, which were already minimal, disappeared.

The next chart is similar to the first one, except it shows the S&P 500 (SPX) in red and the NY NH in green. The information has been calculated with NYSE data. There were not many new highs to begin with, and yet they disappeared.

The Positives

New lows remained insignificant all 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.

The NY HL Ratio fell to 64% last Friday, yet the data remained positive every day last week. 

The next chart is similar to the one above, except it shows the OTC in blue and OTC HL Ratio in red. The information has been calculated with NASDAQ data. The OTC HL Ratio actually rose, finishing the week at a barely positive 56%.

Seasonality

Next week includes the five trading days prior to the third Friday of September, all 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 1953 to 2019. There are summaries for both the fourth year of the Presidential Cycle, and all years combined. Prior to 1953, the market traded six days a week, so that data has been ignored. Returns for the coming week have been modestly positive by all measures.

The number following the year is the position in the Presidential Cycle. Daily returns from Monday through third Friday:

OTC Presidential Year 4 (PY4)

•    Year     Mon    Tue    Wed     Thur    Fri     Totals
•  1964-4 0.26% 0.14%-0.12% 0.29% 0.31% 0.88%
•  1968-4-0.07% 0.60% 0.00% 0.31%-0.13% 0.72%
•  1972-4-0.67%-0.84% 0.26% 0.05% 0.07%-1.13%
•  1976-4-0.25%-0.47% 0.11% 0.45% 0.63% 0.46%
•  1980-4 0.01% 0.91% 1.38%-0.18% 0.89% 3.01%
•  1984-4-0.08%-0.55%-0.39% 0.05%-0.18%-1.15%
•  1988-4 0.12% 0.08% 0.38%-0.30% 0.32% 0.61%
•  1992-4 1.92%-1.07%-0.34% 0.33% 0.22% 1.07%
•  1996-4 0.45% 0.78% 0.20% 0.53% 0.63% 2.58%
•  Avg  -  0.48% 0.03% 0.25% 0.09% 0.37% 1.22%
•  2000-4-2.06%-1.20% 1.15% 0.51%-2.01%-3.61%
•  2004-4 0.85% 0.26%-0.99% 0.40% 0.32% 0.84%
•  2008-4-3.60% 1.28%-4.94% 4.78% 3.40% 0.92%
•  2012-4-0.17%-0.03% 0.15%-0.21% 0.13%-0.12%
•  2016-4 1.68%-1.09% 0.36% 1.47%-0.10% 2.32%
•  Avg  -   -0.66%-0.15%-0.85% 1.39% 0.35% 0.07%

OTC summary for PY4 1964 - 2016 

•  Avg -  -0.12%-0.09%-0.21% 0.61% 0.32% 0.53%
•  Win%  - 50% 50% 62% 79% 71% 71%

OTC summary for all years 1963 - 2019

•  Avg - 0.04% 0.21% 0.04% 0.22% 0.28% 0.78%
•  Win% -  44% 58% 61% 65% 67% 63%

SPX PY4

•   Year    Mon     Tue     Wed    Thur     Fri     Totals
•  1956-4-0.04%-0.85%-1.18%-0.06% 0.80%-1.33%
•  1960-4-0.61% 0.11%-0.70%-0.40%-0.20%-1.79%
•  1964-4-0.28%-0.26% 0.29% 0.66%-0.37% 0.04%
•  1968-4 0.38% 0.26% 0.00% 0.09% 0.07% 0.79%
•  1972-4-0.58%-0.95% 0.40% 0.03%-0.11%-1.22%
•  1976-4-0.34%-0.34% 0.30% 1.05% 0.88% 1.55%
•  Avg  -   -0.29%-0.24% 0.07% 0.29% 0.05%-0.13%
•  1980-4 0.10% 0.85% 1.68%-0.36% 0.66% 2.93%
•  1984-4 0.05%-0.72%-0.42% 0.32%-1.07%-1.85%
•  1988-4-0.14% 0.36% 0.70%-0.44% 0.94% 1.43%
•  1992-4 1.36%-1.29% 0.04% 0.00% 0.71% 0.82%
•  1996-4 0.51%-0.15%-0.22% 0.23% 0.59% 0.95%
•  Avg  -  0.38%-0.19% 0.36%-0.05% 0.37% 0.86%
•  2000-4-0.35%-0.49% 0.20%-0.27%-1.02%-1.93%
•  2004-4 0.17% 0.22%-0.71% 0.28% 0.45% 0.42%
•  2008-4-4.71% 1.75%-4.71% 4.33% 4.03% 0.68%
•  2012-4-0.31%-0.13% 0.12%-0.05%-0.01%-0.38%
•  2016-4 1.47%-1.48%-0.06% 1.01%-0.38% 0.56%
•  Avg  -   -0.75%-0.02%-1.03% 1.06% 0.61%-0.13%

SPX summary for PY4 1956 - 2016 

•  Avg -  -0.21%-0.19%-0.28% 0.40% 0.37% 0.10%
•  Win% - 44% 38% 53% 63% 56% 63%

SPX summary for all years 1953 - 2019

•  Avg - 0.09% 0.13% 0.10% 0.17% 0.13% 0.62%
•  Win% - 51% 57% 65% 57% 55% 63%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms. M2 growth accelerated a bit last month.

Interest rates at their close last Friday, and their changes from last month:

• 2 year yield: 0.129% down from 0.149%.
• 5 year yield: 0.245% down from 0.294%.
• 10 year yield: 0.671% down from 0.7.09%.
• 30 year yield: 1.416% up from 1.448%.

A carefully managed yield curve is present.

The next chart is a close up of the last chart displaying just the past year.

Conclusion

The only positive thing I could say about last week is that there was not a significant increase in the number of new lows. The strongest sectors last week were basic materials and transportation. The weakest sectors were utilities and energy. 

I expect the major averages to be higher on Friday, September 18 than they were on Friday, September 11. Last week's positive forecast was a miss.