The good news is:

• All of the major indices except the NASDAQ composite (OTC) closed at all time highs last Friday. 

The Negatives

After a straight up week the market is, short term, overbought.

The Positives

The bottom is in.  New lows disappeared last week and the secondaries led the way up.

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The first chart covers the past 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NYNL has been plotted on an inverted Y axis so DECREASING numbers of new lows move the indicator upward (up is good)  Dashed vertical lines have been drawn on the first trading day of each month.

The bottom is in.

 

The next chart is similar to the first one except it shows the OTC in blue and OTC NL, in brown, has been calculated with NASDAQ data.

Ditto.

 

The next 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. 

NY NH confirmed the SPX new high; higher prices ahead.

 

The next chart is similar to the first one except it shows the OTC in blue and OTC NH, in green, has been calculated with NASDAQ data.

Not as pretty as the chart above, but the numbers are HUGE.

 

The next chart covers the past 6 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 at 95% is very strong.

 

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 rose above 90%.

Seasonality

Next week includes the 5 trading days prior to the third Friday of March during the first 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 2020 while SPX data runs from 1953 to 2020.  There are summaries for both the 1^st 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 mixed.  Next week is the anniversary of the Covid Crash which was had an impact the all year numbers.

Report for the week before the 3rd Friday of March.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday through 3rd Friday.

 

OTC Presidential Year 1 (PY1)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1965-1   0.62%   0.08%   0.14%   0.04%  -0.27%   0.62%

 1969-1  -0.44%  -0.22%   0.01%   0.47%   0.60%   0.43%

 1973-1  -0.11%   0.19%   0.01%   0.41%  -1.13%  -0.63%

 1977-1   0.12%   0.21%   0.20%  -0.17%   0.02%   0.39%

 

 1981-1   0.63%  -0.12%   0.40%   0.22%   0.90%   2.02%

 1985-1  -0.41%   0.08%  -1.14%  -0.27%   0.18%  -1.56%

 1989-1   0.16%  -0.14%   0.24%   0.62%  -1.79%  -0.90%

 1993-1   0.35%   0.04%  -1.16%   0.00%  -0.68%  -1.45%

 1997-1  -1.05%  -0.75%  -1.60%   0.78%  -0.41%  -3.03%

 

 Avg     -0.06%  -0.18%  -0.65%   0.27%  -0.36%  -0.98%

 

 2001-1  -6.30%   4.75%  -2.12%  -1.59%  -2.57%  -7.83%

 2005-1   0.46%  -0.78%  -0.94%   0.03%  -0.43%  -1.66%

 2009-1  -1.92%   4.14%   1.99%  -0.52%  -1.77%   1.92%

 2013-1   0.26%  -0.32%   0.09%   0.43%  -0.30%   0.15%

 2017-1   0.24%  -0.32%   0.74%   0.01%   0.00%   0.67%

 

 Avg     -1.45%   1.49%  -0.05%  -0.33%  -1.01%  -1.35%

 

OTC summary for PY1 1965 - 2017 

 Avg     -0.53%   0.49%  -0.23%   0.03%  -0.54%  -0.78%

 Win%       57%     50%     64%     71%     36%     50%

 

OTC summary for all years 1963 - 2020

 Avg     -0.29%   0.17%  -0.04%   0.20%  -0.14%  -0.11%

 Win%       53%     55%     64%     72%     52%     59%

 

SPX PY1

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1953-1   0.15%   0.42%  -0.34%  -0.08%  -0.15%   0.00%

 1957-1  -0.66%  -0.07%   0.66%   0.07%  -0.05%  -0.04%

 

 1961-1   0.28%  -0.44%   0.30%   1.01%   0.61%   1.76%

 1965-1   0.03%  -0.13%  -0.13%  -0.24%   0.03%  -0.42%

 1969-1   0.26%   0.24%   0.73%   0.64%  -0.21%   1.66%

 1973-1   0.06%   0.54%   0.44%  -0.75%  -0.51%  -0.21%

 1977-1   0.77%   0.55%   0.19%  -0.09%  -0.22%   1.20%

 

 Avg      0.28%   0.16%   0.31%   0.11%  -0.06%   0.79%

 

 1981-1   1.18%  -0.56%   0.22%  -0.57%   0.46%   0.74%

 1985-1  -0.17%   0.49%  -0.82%  -0.20%  -0.74%  -1.44%

 1989-1   0.83%  -0.06%   0.52%   0.93%  -2.25%  -0.03%

 1993-1   0.36%  -0.01%  -0.68%   0.80%  -0.38%   0.08%

 1997-1   0.32%  -0.76%  -0.49%  -0.40%   0.19%  -1.14%

 

 Avg      0.50%  -0.18%  -0.25%   0.11%  -0.54%  -0.36%

 

 2001-1  -4.32%   1.48%  -2.58%   0.59%  -1.96%  -6.79%

 2005-1   0.56%  -0.75%  -0.81%   0.18%  -0.05%  -0.87%

 2009-1  -0.35%   3.21%   2.09%  -1.30%  -1.98%   1.67%

 2013-1   0.32%  -0.24%   0.13%   0.56%  -0.16%   0.61%

 2017-1   0.04%  -0.34%   0.84%  -0.16%  -0.13%   0.24%

 

 Avg     -0.75%   0.67%  -0.07%  -0.03%  -0.86%  -1.03%

 

SPX summary for PY1 1953 - 2017 

 Avg     -0.02%   0.21%   0.02%   0.06%  -0.44%  -0.18%

 Win%       76%     41%     59%     47%     24%     53%

 

SPX summary for all years 1953 - 2020

 Avg     -0.12%   0.27%   0.07%   0.20%  -0.04%   0.38%

 Win%       63%     56%     59%     57%     57%     63%

 

Conclusion

The secondaries led the market out of a well defined bottom and the new highs for the Dow Jones Industrial Average, SPX and Russell 2000 were confirmed by lots of new highs.

The strongest sectors last week were Banks (same as the past several weeks) and Utilities while the weakest were Internet and Energy services.

I expect the major averages to be higher on Friday March 19 than they were on Friday March 12.