The good news is:

• The blue chips have been holding up pretty well.

 

The Negatives

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them binary so position is less important.

The first chart covers the past 6 months showing the S&P 500 (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.  Dashed vertical lines have been drawn on the 1st trading day of each month.

NYSE SI’s all hit the bottom of the chart last week.

 

The next chart is similar to the one above, except it shows the Nasdaq composite (OTC), in blue, as the index and the SI’s have been generated from Nasdaq data.  

All of Nasdaq SI’s are also at the bottom of the chart. 

 

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 moved sharply downward last week.

 

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 also moved downward 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 fell deeper into negative territory last week. 

 

The Positives

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 tumbled, but remained in positive territory. 

 

The next 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.  

NY NH fell along with prices after confirming a recent high.  The confirmation implies there should be another higher high for the SPX in the next couple months.

 

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 fell sharply after confirming the mid July index high.

 

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of August 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 mixed, modest and weaker during the 3rd year of the Presidential Cycle than other years. 

 

Witching Summary for OTC

Report for the week before the 3rd Friday of Aug

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

Daily returns from Monday through 3rd Friday.

 

OTC Presidential Year 3 (PY3)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1963-3   0.47%   0.06%   0.35%   0.61%   0.17%   1.66%

 1967-3  -0.29%  -0.63%   0.00%  -0.24%  -0.20%  -1.36%

 1971-3   2.30%   0.99%  -0.50%  -0.35%  -0.11%   2.33%

 1975-3  -0.13%   0.19%  -0.64%  -0.81%   0.17%  -1.22%

 1979-3   0.69%   0.16%   0.57%   0.20%   0.27%   1.90%


 Avg      0.61%   0.15%  -0.05%  -0.12%   0.06%   0.66%


 1983-3   0.73%  -0.64%   0.33%  -0.35%  -0.23%  -0.15%

 1987-3   0.01%  -1.08%   0.27%   1.07%   0.54%   0.81%

 1991-3   0.33%   0.86%   0.64%  -0.39%  -0.62%   0.82%

 1995-3   0.83%   0.00%   1.32%   0.33%   0.20%   2.69%

 1999-3   0.28%   0.98%  -0.51%  -1.37%   1.03%   0.42%


 Avg      0.44%   0.03%   0.41%  -0.14%   0.18%   0.92%


 2003-3   1.06%   1.53%  -0.02%   0.81%   0.10%   3.49%

 2007-3  -0.10%  -1.70%  -1.61%  -0.32%   2.20%  -1.53%

 2011-3   1.88%  -1.24%  -0.47%  -5.22%  -1.62%  -6.67%

 2015-3   0.86%  -0.64%  -0.80%  -2.82%  -3.52%  -6.91%

 2019-3  -1.20%   1.95%  -3.02%  -0.09%   1.67%  -0.71%


 Avg      0.50%  -0.02%  -1.19%  -1.53%  -0.23%  -2.47%


OTC summary for PY3 1963 - 2019 

 Avg      0.51%   0.06%  -0.29%  -0.60%   0.00%  -0.30%

 Win%       73%     57%     43%     33%     60%     53%


OTC summary for all years 1963 - 2022

 Avg      0.24%   0.00%   0.08%  -0.14%  -0.09%   0.09%

 Win%       67%     47%     57%     54%     55%     52%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3  -0.09%  -0.74%   0.10%  -0.14%   0.43%  -0.45%

 1959-3  -0.20%  -0.93%  -0.60%   1.49%  -0.10%  -0.34%


 1963-3   0.16%   0.28%   0.40%   0.44%   0.15%   1.43%

 1967-3  -0.54%   0.14%  -0.23%   0.08%   0.16%  -0.39%

 1971-3   3.21%   1.25%  -1.39%  -0.45%   0.17%   2.79%

 1975-3   0.62%   0.66%  -1.32%  -0.43%   0.89%   0.41%

 1979-3   0.96%   0.09%   0.68%  -0.15%   0.19%   1.78%


 Avg      0.88%   0.48%  -0.37%  -0.10%   0.31%   1.20%


 1983-3   0.96%  -0.18%   1.15%  -1.05%   0.26%   1.13%

 1987-3   0.04%  -1.45%   0.18%   1.52%   0.32%   0.59%

 1991-3   0.23%   0.41%   0.07%  -0.15%  -0.96%  -0.39%

 1995-3   0.83%  -0.21%   0.25%  -0.17%   0.03%   0.74%

 1999-3   0.23%   1.01%  -0.84%  -0.70%   0.98%   0.68%


 Avg      0.46%  -0.09%   0.16%  -0.11%   0.13%   0.55%


 2003-3   0.31%   1.00%  -0.64%   0.66%   0.02%   1.34%

 2007-3  -0.05%  -1.82%  -1.39%   0.32%   2.46%  -0.47%

 2011-3   2.18%  -0.97%   0.09%  -4.46%  -1.50%  -4.66%

 2015-3   0.52%  -0.26%  -0.83%  -2.11%  -3.19%  -5.86%

 2019-3  -1.22%   1.50%  -2.93%   0.25%   1.44%  -0.96%


 Avg      0.35%  -0.11%  -1.14%  -1.07%  -0.15%  -2.12%


SPX summary for PY3 1955 - 2019 

 Avg      0.48%  -0.01%  -0.43%  -0.30%   0.10%  -0.15%

 Win%       71%     53%     47%     41%     76%     53%


SPX summary for all years 1953 - 2022

 Avg      0.17%   0.02%  -0.09%  -0.08%   0.02%   0.04%

 Win%       66%     50%     54%     53%     59%     50%

 

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart, made with FastTrack, covers the past 5 years showing the SPX in red and M2 money supply in green.

Money supply remained constant the past month.

 

Treasury rates at their close last Friday and their changes from last month:

2yr yield 4.893% up from 4.747%

5yr yield 4.303% up from 4.047%

10yr yield 4.154% up from 3.832% 

30yr yield 4.261% up from 3.929%

Everything is inverted (shorter term maturities yield more than longer term maturities) except the 30 yr which is higher than the 10 yr.

The next chart covers the past 15 months showing the 30 year yield over the 5 year yield on top, The 1, 2, 5, 10 & 30 year treasury rates in the middle group and the SPX with a 50 day simple moving average on the bottom.

Conclusion

The breadth indicators are all headed downward.

Seasonality is modestly negative for the coming week.

The strongest sectors last week were Energy (for the 3rd week) and Health care while the weakest were Transportation and Electronics.

I expect the major averages to be lower on Friday August 18 than they were on Friday August 11. 

Last week the Dow Jones Industrial Average was up while the other indices were down; so I am calling last week's positive forecast a tie.

 

 

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