Technical Market Report - Saturday, December 16
The good news is:
- The Dow Jones Industrial Average (DJIA) closed at its all time high Friday while the NASDAQ composite (OTC) and the S&P 500 (SPX) closed at their highs for the year on Friday.
The Negatives
The market is overbought.
The Positives
Seasonality for next week is positive.
The first 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. Dashed vertical lines have been drawn on the 1st trading day of each month.
NY NH, did confirm the SPX at its new high for the year.
(Click on image to enlarge)
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 confirmed the OTC high for the year.
(Click on image to enlarge)
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 finished the week, in comfortably positive territory at 70%.
(Click on image to enlarge)
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 rose to a very strong 91%.
(Click on image to enlarge)
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 was, pretty much, flat last week.
(Click on image to enlarge)
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.
NY NL continued to rise.
(Click on image to enlarge)
Summation indices are running totals of oscillator values.
Short term momentum indicators applied to summation indices make them nearly binary.
The next chart covers the past 6 months showing the 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.
NY HL SI Mom aborted its downward move while the others remained maxed out at the top of the chart.
(Click on image to enlarge)
The next chart is similar to the one above, except it shows the OTC, in blue, as the index and the SI’s have been generated from NASDAQ breadth data.
All of the OTC SI’s were heading downward until Wednesday.
(Click on image to enlarge)
Seasonality
Next week includes the 5 trading days prior to the 4th Friday of December during the 3rd 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 2022 while SPX data runs from 1953 to 2022. There are summaries for both the 3rd 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 positive by all measures and stronger during the 3rd year of the Presidential Cycle than other years.
Report for the week before the 4th Friday of December.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.
OTC Presidential Year 3 (PY3)
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.14% -0.46% 0.00% 0.20% 0.83% 0.43%
1967-3 -0.30% -0.49% -0.35% -0.65% -0.25% -2.05%
1971-3 -0.21% 0.21% 0.57% 0.36% 1.02% 1.94%
1975-3 -0.43% 0.38% 0.65% 0.00% 1.00% 1.59%
1979-3 -0.13% 0.00% 0.03% 0.15% 0.40% 0.44%
Avg -0.25% -0.09% 0.22% 0.01% 0.60% 0.47%
1983-3 -0.16% -0.39% 0.41% 0.21% 0.12% 0.19%
1987-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1991-3 1.52% 1.04% 0.00% 1.77% 1.14% 5.48%
1995-3 -2.00% 2.00% -0.11% 1.49% 0.61% 1.99%
1999-3 0.15% -0.08% 1.75% -0.11% 0.80% 2.50%
Avg -0.12% 0.64% 0.68% 0.84% 0.67% 2.54%
2003-3 0.25% 0.97% -0.28% 0.00% 0.20% 1.13%
2007-3 0.80% 0.00% 0.40% -1.75% -0.09% -0.63%
2011-3 -1.26% 2.00% -0.99% 0.83% 0.74% 1.32%
2015-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2019-3 0.23% 0.08% 0.00% 0.78% -0.17% 0.91%
Avg 0.00% 1.02% -0.29% -0.05% 0.17% 0.68%
OTC summary for PY3 1963 - 2019
Avg -0.13% 0.48% 0.21% 0.30% 0.49% 1.17%
Win% 38% 64% 60% 73% 77% 85%
OTC summary for all years 1963 - 2022
Avg -0.24% -0.02% 0.19% 0.18% 0.29% 0.33%
Win% 43% 44% 60% 63% 73% 63%
SPX PY3
Year Mon Tue Wed Thur Fri Totals
1955-3 -0.24% -0.16% 0.87% 0.15% 0.20% 0.82%
1959-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1963-3 -0.63% 0.22% 0.00% 0.47% 0.16% 0.22%
1967-3 -0.27% -0.15% 0.55% 0.24% -0.19% 0.18%
1971-3 0.21% 0.99% 0.26% -0.42% 0.30% 1.34%
1975-3 -0.74% 0.67% 0.82% 0.00% 0.88% 1.63%
1979-3 0.07% 0.00% 0.11% 0.17% -0.11% 0.23%
Avg -0.28% 0.43% 0.43% 0.12% 0.21% 0.72%
1983-3 -0.04% -0.20% 0.96% -0.18% -0.03% 0.51%
1987-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1991-3 2.00% 0.63% 0.00% 1.38% 0.40% 4.41%
1995-3 -1.55% 0.84% -0.98% 0.75% 0.24% -0.69%
1999-3 -0.09% 0.04% 0.40% 0.07% 0.33% 0.75%
Avg 0.08% 0.33% 0.13% 0.51% 0.23% 1.25%
2003-3 0.39% 0.28% -0.18% 0.00% 0.17% 0.66%
2007-3 0.81% 0.00% 0.08% -1.42% 0.14% -0.39%
2011-3 -1.17% 2.00% 0.19% 0.83% 0.90% 2.75%
2015-3 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2019-3 0.09% -0.02% 0.00% 0.51% 0.00% 0.58%
Avg 0.03% 0.75% 0.03% -0.03% 0.30% 0.90%
SPX summary for PY3 1955 - 2019
Avg -0.08% 0.43% 0.28% 0.21% 0.24% 0.93%
Win% 43% 67% 82% 75% 79% 86%
SPX summary for all years 1953 - 2022
Avg -0.18% 0.00% 0.26% 0.14% 0.20% 0.35%
Win% 38% 48% 67% 59% 71% 71%
Conclusion
The market is overbought, but, Seasonality for next week is very strong.
The strongest sectors last week were Banks and Transportation while the weakest were Precious Metals (for the 2nd week) and Energy (for the 6th week at the bottom).
I expect the major averages to be higher on Friday December 22 than they were on Friday December 15.
Last weeks negative forecast was a miss.
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