The good news is:

• The S&P 500 (SPX) & Dow Jones Industrial Average (DJIA) both closed at all time highs last Thursday. 

 

The Negatives

The first chart covers the last 6 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 1st trading day of each month.  

OTC NH has been deteriorating for the past month with lower highs and lower lows.  

 

The Positives

The next chart is similar to the one above except it shows the SPX in red and OTC NH in green has been calculated with NYSE data.  

The SPX all time high last Thursday was confirmed by NY NH.

 

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL) in blue.  NY NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good).  

NY NL; NYSE new lows have been at insignificant levels.

 

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

Nasdaq new lows decreased last week.

 

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 rose last week; finishing the week at a comfortable 73%. 

 

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 finished the week at an very strong 93%. 

 

Seasonality

Next week includes the first 4 trading days of September during the 1st 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 2024 while SPX data runs from 1928 to 2024.  There are summaries for both the 1st year of the Presidential Cycle and all years combined. 

Seasonality for the coming week has been modest and mixed.

 

Report for the first 4 days of September.

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 1 (PY1)

               Day1      Day2      Day3      Day4      Totals

 1965-1       0.22% 3   0.27% 4   0.74% 5   0.48% 2     1.72%

 1969-1       0.32% 2   0.09% 3  -0.16% 4  -0.48% 5    -0.24%

 1973-1       0.60% 2   0.50% 3   0.31% 4   0.62% 5     2.03%

 1977-1       0.30% 4   0.43% 5  -0.05% 2   0.38% 3     1.06%

 1981-1      -0.30% 2   0.11% 3  -1.74% 4  -1.23% 5    -3.15%

 

 Avg          0.23%     0.28%    -0.18%    -0.05%       0.28%

 

 1985-1      -0.39% 2  -0.33% 3  -0.10% 4   0.31% 5    -0.51%

 1989-1       0.43% 5   0.02% 2  -0.46% 3   0.09% 4     0.08%

 1993-1       0.45% 3   0.34% 4   0.14% 5  -1.38% 2    -0.46%

 1997-1       1.94% 2   0.01% 3   0.40% 4   0.69% 5     3.03%

 2001-1      -1.92% 2  -0.66% 3  -3.03% 4  -1.05% 5    -6.67%

 

 Avg          0.10%    -0.13%    -0.61%    -0.27%      -0.91%

 

 2005-1      -0.19% 4  -0.32% 5   1.20% 2   0.24% 3     0.93%

 2009-1      -2.00% 2  -0.09% 3   0.82% 4   1.79% 5     0.52%

 2013-1       0.63% 2   1.01% 3   0.27% 4   0.03% 5     1.94%

 2017-1       0.10% 5  -0.92% 2   0.28% 3   0.07% 4    -0.47%

 2021-1       0.33% 3   0.14% 4   0.21% 5   0.07% 2     0.75%

 

 Avg         -0.23%    -0.04%     0.56%     0.44%       0.73%

 

OTC summary for PY1 1965 - 2021

Averages      0.03%     0.04%    -0.08%     0.04%       0.04%

% Winners       67%       67%       60%       73%         60%

MDD  9/7/2001  6.52% --  9/4/1981  3.13% --  9/2/2009  2.09%

 

OTC summary for all years 1963 - 2024

Averages     -0.03%     0.07%    -0.09%     0.12%       0.08%

% Winners       57%       60%       58%       58%         53%

MDD 9/7/2001  6.52% --  9/4/2020  6.17% --  9/6/2024  5.77%

 

SPX PY1

               Day1      Day2      Day3      Day4      Totals

 1929-1       0.35% 2  -0.31% 3  -2.21% 4   2.61% 5     0.44%

 1933-1       1.26% 5  -3.47% 2   0.09% 3  -1.38% 4    -3.50%

 1937-1      -2.68% 3  -1.60% 4   0.65% 5   0.78% 6    -2.86%

 1941-1       0.39% 2  -0.68% 3  -0.29% 4  -0.29% 5    -0.87%

 

 1945-1       0.00% 2   0.13% 3   1.35% 4  -0.06% 5     1.42%

 1949-1       0.59% 4  -0.13% 5  -0.07% 2   0.65% 3     1.05%

 1953-1       0.43% 2   0.60% 3  -0.21% 4   0.26% 5     1.07%

 1957-1       0.49% 2  -0.86% 3  -0.51% 4  -0.31% 5    -1.19%

 1961-1       0.18% 5  -0.34% 2   0.74% 3  -0.16% 4     0.41%

 

 Avg          0.34%    -0.12%     0.26%     0.07%       0.55%

 

 1965-1       0.00% 3   0.55% 4   0.47% 5   0.34% 2     1.36%

 1969-1       0.03% 2  -0.59% 3  -0.82% 4  -0.59% 5    -1.97%

 1973-1       0.25% 2   0.12% 3   0.49% 4  -0.37% 5     0.49%

 1977-1       0.06% 4   0.64% 5   0.27% 2   0.31% 3     1.28%

 1981-1       0.19% 2   0.38% 3  -1.82% 4  -0.97% 5    -2.22%

 

 Avg          0.11%     0.22%    -0.28%    -0.26%      -0.21%

 

 1985-1      -0.38% 2  -0.29% 3  -0.05% 4   0.52% 5    -0.20%

 1989-1       0.65% 5  -0.33% 2  -0.94% 3  -0.25% 4    -0.88%

 1993-1      -0.09% 3  -0.40% 4   0.01% 5  -0.61% 2    -1.09%

 1997-1       3.13% 2   0.03% 3   0.33% 4  -0.20% 5     3.28%

 2001-1      -0.06% 2  -0.11% 3  -2.24% 4  -1.86% 5    -4.27%

 

 Avg          0.65%    -0.22%    -0.58%    -0.48%      -0.63%

 

 2005-1       0.10% 4  -0.29% 5   1.26% 2   0.24% 3     1.31%

 2009-1      -2.21% 2  -0.33% 3   0.85% 4   1.31% 5    -0.38%

 2013-1       0.42% 2   0.81% 3   0.12% 4   0.01% 5     1.35%

 2017-1       0.20% 5  -0.75% 2   0.31% 3  -0.02% 4    -0.26%

 2021-1       0.03% 3   0.28% 4  -0.03% 5  -0.34% 2    -0.06%

 

 Avg         -0.29%    -0.06%     0.50%     0.24%       0.39%

 

SPX summary for PY1 1929 - 2021

Averages      0.14%    -0.29%    -0.09%    -0.02%      -0.26%

% Winners       71%       38%       54%       42%         46%

MDD  9/7/1933  4.72% --  9/2/1937  4.24% --  9/7/2001  4.22%

 

SPX summary for all years 1928 - 2024

Averages     -0.08%     0.13%     0.18%    -0.08%       0.14%

% Winners       63%       53%       55%       43%         55%

MDD 9/4/1946  7.15% --  9/4/1974  4.80% --  9/7/1933  4.72%

 

September

Since 1963, over all years, the OTC in September has been up 59% of the time and has, on average, had a loss of -0.4% for the month.  During the 1st year of the Presidential Cycle September has been up 67% time with an no average gain or loss (0.0%).  The best September ever for the OTC was 1998 (+13.0%), the worst 2001 (-17.0%).

The average month has 21 trading days.  The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10.  In months when 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 1st trading day and at 5 trading day intervals after that.  The line is solid on the 11^th trading day, the dividing point.

In the chart below the blue line shows the average of the OTC in September over all years since 1963 while the green line shows the average during the 1st year of the Presidential Cycle over the same period.

 

Since 1928 the SPX has been up 45% of the time in September with an average loss of (-1.1%).  During the 1st year of the Presidential Cycle the SPX has been up 42% of the time with an average loss of (-1.6%).  The best September ever for the SPX was 1939 (+16.5%) the worst 1931 (-29.9%).

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in September in red and the performance during the 1st year of the Presidential Cycle in green.

 

Since 1979 the Russell 2000 (R2K) has been up 52% of the time in September with an average loss of (-0.8%).  During the 1st year of the Presidential Cycle the R2K has been up 64% of the time and has had an average loss of (-0.3%).  The best September ever for the R2K, 2010 (+12.3%), the worst 2001 (-13.6%

The chart below is similar to those above except it shows the daily performance over all years of the R2K in September in magenta and the performance during the 1st year of the Presidential Cycle in green.

 

Since 1885 the DJIA has been up 44% of the time in September with an average loss of (-1.0%).  During the 1st year of the Presidential Cycle the DJIA has been up 51% of the time in September with an average loss of (-1.1%).  The best September ever for the DJIA, 1939 (+13.5%), the worst 1930 -30.7%.

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in September in grey and the performance during the 1st year of the Presidential Cycle in green.

 

Conclusion

We are seeing all time highs with strong breadth; what could go wrong?

The strongest sectors last week were Precious Metals and Energy while the weakest were Biotech (for the 2^nd week) and Utilities.

I expect the major averages to be higher on Friday September 5 than they were on Friday August 29.

Last week the Russell 2000 was up a little while the other major indices were down a little: so I am calling last week's positive forecast a tie.

 

 

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