The good news is:

• The market has had a remarkable rally.

The Negatives

We may be at a turning point, but it is a little too early to tell.

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 in green.

OTC NH, there may be trouble here. The recent rise has been arrested at a very modest level.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH has been calculated with NYSE data.

NY NH slowed its rise at a very modest level.

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 vertical lines have been drawn on the 1st trading day of each month.  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 turned downward and finished the week at a negative level after its brief excursion into positive territory. 

The Positives

The next chart is similar to the previous one except it shows the SPX in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL Ratio and finished the week barely in positive territory,

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 continued rising.  It will take more than 49 new lows to turn the indicator downward. 

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

OTC NL ditto.  More than 95 Nasdaq new lows will turn OTC NL downward.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of August during the 2nd 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 2021 while SPX data runs from 1953 to 2021.  There are summaries for both the 2nd 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, modestly positive over all years and modestly negative during the 2nd year of the Presidential Cycle.

Report for the week before the 4th Friday of August.

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

Daily returns from Monday through the 4th Friday.


OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2  -0.69%  -2.36%   0.00%   1.36%  -1.16%  -2.85%

 1970-2   2.41%   0.64%   0.98%  -0.05%   1.15%   5.13%

 1974-2  -1.11%   0.91%  -1.22%  -2.05%  -1.60%  -5.07%

 1978-2  -0.70%   0.07%   0.64%   0.41%   0.41%   0.84%

         

 1982-2   1.75%   1.38%   1.57%   1.85%  -0.32%   6.23%

 1986-2  -0.24%  -0.12%   0.56%   0.06%   0.10%   0.35%

 1990-2  -1.25%  -2.29%  -1.27%  -3.90%   1.97%  -6.74%

 1994-2  -0.02%   0.77%   0.50%   0.41%   1.08%   2.74%

1998-2  -0.38%   0.41%  -1.66%  -4.63%  -2.77%  -9.03%


 Avg     -0.03%   0.03%  -0.06%  -1.24%   0.01%  -1.29%


 2002-2   2.46%  -1.29%   2.37%   0.97%  -2.97%   1.55%

 2006-2  -0.75%   0.11%  -0.71%   0.11%   0.15%  -1.09%

 2010-2  -0.92%  -1.66%   0.84%  -1.07%   1.65%  -1.17%

 2014-2   0.97%   0.43%  -0.02%   0.12%   0.14%   1.64%

 2018-2   0.06%   0.49%   0.38%  -0.13%   0.86%   1.65%


 Avg      0.36%  -0.39%   0.57%   0.00%  -0.04%   0.52%


OTC summary for PY2 1966 - 2018 

 Avg      0.11%  -0.18%   0.23%  -0.47%  -0.09%  -0.42%

 Win%       36%     64%     62%     57%     64%     57%


OTC summary for all years 1963 - 2021

 Avg     -0.08%   0.07%   0.40%  -0.12%   0.19%   0.43%

 Win%       44%     58%     67%     47%     64%     61%

SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2  -0.67%  -0.42%  -0.71%  -0.26%   0.29%  -1.77%

 1958-2  -0.59%   0.17%   0.04%   0.66%   0.21%   0.49%


 1962-2   0.61%  -0.42%   1.12%  -0.13%  -0.20%   0.97%

 1966-2  -1.73%  -0.17%   1.23%  -1.28%  -2.11%  -4.06%

 1970-2   2.21%   0.16%   0.11%  -0.16%   0.96%   3.28%

 1974-2  -1.45%   0.51%  -1.92%  -0.97%  -1.72%  -5.55%

 1978-2  -0.80%   0.40%   0.58%   0.16%  -0.17%   0.17%


 Avg     -0.23%   0.10%   0.22%  -0.48%  -0.65%  -1.04%


 1982-2   2.73%  -0.65%   1.93%   0.82%  -1.21%   3.62%

 1986-2   0.09%  -0.35%   1.32%  -0.04%   0.21%   1.23%

 1990-2   0.21%  -2.02%  -1.65%  -3.00%   1.45%  -5.02%

 1994-2  -0.30%   0.48%   0.97%  -0.20%   1.22%   2.17%

 1998-2   0.64%   0.44%  -0.80%  -3.84%  -1.48%  -5.03%


 Avg      0.68%  -0.42%   0.36%  -1.25%   0.04%  -0.60%


 2002-2   2.36%  -1.40%   1.27%   1.41%  -2.27%   1.37%

 2006-2  -0.37%   0.10%  -0.45%   0.24%  -0.07%  -0.55%

 2010-2  -0.40%  -1.45%   0.33%  -0.77%   1.66%  -0.64%

 2014-2   0.85%   0.50%   0.25%   0.29%  -0.20%   1.70%

 2018-2   0.24%   0.21%  -0.04%  -0.17%   0.62%   0.86%


 Avg      0.54%  -0.41%   0.27%   0.20%  -0.05%   0.55%


SPX summary for PY2 1954 - 2018

 Avg      0.21%  -0.23%   0.21%  -0.43%  -0.17%  -0.40%

 Win%       53%     53%     65%     35%     47%     59%


SPX summary for all years 1953 - 2021

 Avg     -0.13%   0.05%   0.25%  -0.14%   0.02%   0.05%

 Win%       45%     58%     60%     45%     52%     61%

Conclusion

The market stalled last week. Not enough to penetrate the upward price trend lines, but enough to disturb some of the upward moving breadth indicators. Next week should give us clarity on direction.

The strongest sectors last week were Utilities and Energy (up from the bottom) while the weakest were Precious metals and Electronics.

I expect the major averages to be higher on Friday, August 26 than they were on Friday, August 19.

Last week's positive forecast was a miss.

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