The good news is:

• Seasonality has been pretty good for the coming week.

The Negatives

Summation indices are running totals of oscillator values.

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

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 remained at 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.  

The Nasdaq’s AD SI turned upward while the others remained 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 continued its downward fall with a 1 day interruption.

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 moving downward, but, not as sharply as the previous 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 remained deep in negative territory last week. 

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 remained in negative territory. 

The Positives

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 confirmed the recent high.  That confirmation implies there should be another higher high for the SPX in the next couple months.  At the rate NY NH is falling it is difficult to imagine it confirming a new index high.

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 ditto the OTC.

Seasonality

Next week includes the last 4 trading days of August and the 1st trading day of September 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 1928 to 2022.  There are summaries for both the 3rd year of the Presidential Cycle and all years combined.  

Average returns for the coming week have been mixed, modest and stronger during the 3rd year of the Presidential Cycle than other years. 

Report for the last 4 days of August and the first day 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 3 (PY3)

               Day4      Day3      Day2      Day1      Day1      Totals

 1963-3      -0.20% 2   0.14% 3   0.20% 4   0.23% 5   0.28% 2     0.65%

 1967-3      -0.59% 1  -0.48% 2   0.11% 3   0.60% 4   0.98% 5     0.61%

 1971-3       0.11% 4   0.30% 5  -0.54% 1  -0.27% 2   0.21% 3    -0.18%

 1975-3      -0.82% 2   0.47% 3   1.95% 4   1.22% 5  -1.42% 2     1.40%

 1979-3       0.02% 2   0.33% 3   0.01% 4   0.25% 5  -1.30% 2    -0.68%


 Avg         -0.30%     0.15%     0.35%     0.41%    -0.25%       0.36%


 1983-3       0.27% 5  -0.33% 1   0.17% 2   0.88% 3   0.73% 4     1.73%

 1987-3       0.04% 3  -0.10% 4  -0.33% 5   0.37% 1  -0.54% 2    -0.57%

 1991-3       0.07% 2   0.87% 3   0.02% 4  -0.13% 5  -0.91% 2    -0.08%

 1995-3      -1.16% 1  -0.46% 2   0.90% 3   0.74% 4  -0.06% 5    -0.03%

 1999-3      -1.10% 4  -0.57% 5  -1.67% 1   0.98% 2   0.42% 3    -1.94%


 Avg         -0.38%    -0.12%    -0.18%     0.57%    -0.07%      -0.18%


 2003-3       0.36% 2   0.65% 3   1.01% 4   0.57% 5   1.71% 2     4.30%

 2007-3      -2.37% 2   2.50% 3   0.08% 4   1.21% 5   1.30% 2     2.73%

 2011-3       2.49% 5   3.32% 1   0.55% 2   0.13% 3  -1.30% 4     5.19%

 2015-3       4.24% 3   2.45% 4   0.32% 5  -1.07% 1  -2.94% 2     3.00%

 2019-3      -0.34% 2   0.38% 3   1.48% 4  -0.13% 5  -1.11% 2     0.28%


 Avg          0.88%     1.86%     0.69%     0.14%    -0.47%       3.10%


OTC summary for PY3 1963 - 2019

Averages      0.07%     0.63%     0.28%     0.37%    -0.26%       1.09%

% Winners       53%       67%       80%       73%       47%         60%

MDD  9/1/2015  3.98% --  8/30/1999  3.31% --  8/28/2007  2.37%


OTC summary for all years 1963 - 2022

Averages     -0.13%     0.13%    -0.08%     0.10%     0.03%       0.05%

% Winners       53%       63%       62%       68%       59%         65%

MDD 8/31/1998  16.63% --  9/3/2002  9.19% --  9/4/2001  7.41%


SPX PY3

               Day4      Day3      Day2      Day1      Day1      Totals

 1931-3      -0.57% 4   1.01% 5   0.79% 6  -1.70% 1   0.43% 2    -0.05%

 1935-3      -0.18% 3   0.63% 4   0.63% 5   0.71% 6  -0.97% 2     0.82%

 1939-3      -1.85% 1   2.78% 2  -1.05% 3  -1.58% 4   1.07% 5    -0.63%


 1943-3      -0.68% 5   0.09% 6  -0.09% 1   1.11% 2   0.34% 3     0.77%

 1947-3       0.00% 2   0.13% 3  -0.20% 4   0.66% 5   0.33% 2     0.92%

 1951-3       0.22% 2   0.79% 3   0.69% 4   0.17% 5   0.00% 2     1.87%

 1955-3       0.44% 5  -0.07% 1  -0.09% 2   0.61% 3   0.44% 4     1.33%

 1959-3       0.14% 3   0.96% 4  -0.25% 5   0.18% 1  -1.22% 2    -0.19%


 Avg          0.02%     0.38%     0.01%     0.55%    -0.02%       0.94%


 1963-3      -0.54% 2   0.73% 3   0.17% 4   0.47% 5   0.22% 2     1.04%

 1967-3      -0.06% 1   0.26% 2   0.20% 3   0.61% 4   0.04% 5     1.05%

 1971-3      -0.17% 4   0.24% 5  -0.96% 1  -0.49% 2   0.04% 3    -1.34%

 1975-3      -1.29% 2   0.56% 3   2.33% 4   0.56% 5  -1.61% 2     0.54%

 1979-3      -0.11% 2   0.00% 3   0.00% 4   0.28% 5  -1.72% 2    -1.55%


 Avg         -0.44%     0.36%     0.35%     0.28%    -0.61%      -0.05%


 1983-3       0.81% 5   0.07% 1   0.20% 2   1.12% 3  -0.10% 4     2.10%

 1987-3      -0.65% 3  -0.95% 4  -1.31% 5   0.84% 1  -1.94% 2    -4.01%

 1991-3      -0.20% 2   0.91% 3  -0.04% 4  -0.26% 5  -0.83% 2    -0.42%

 1995-3      -0.19% 1   0.17% 2   0.16% 3   0.17% 4   0.35% 5     0.67%

 1999-3      -1.43% 4  -1.01% 5  -1.80% 1  -0.27% 2   0.81% 3    -3.70%


 Avg         -0.33%    -0.16%    -0.56%     0.32%    -0.34%      -1.08%


 2003-3       0.30% 2   0.01% 3   0.61% 4   0.52% 5   1.39% 2     2.82%

 2007-3      -2.35% 2   2.19% 3  -0.42% 4   1.12% 5   1.05% 2     1.60%

 2011-3       1.51% 5   2.83% 1   0.23% 2   0.49% 3  -1.19% 4     3.88%

 2015-3       3.90% 3   2.43% 4   0.06% 5  -0.84% 1  -2.96% 2     2.60%

 2019-3      -0.32% 2   0.65% 3   1.27% 4   0.06% 5  -0.69% 2     0.98%


 Avg          0.61%     1.62%     0.35%     0.27%    -0.48%       2.37%


SPX summary for PY3 1931 - 2019

Averages     -0.14%     0.67%     0.05%     0.20%    -0.29%       0.48%

% Winners       30%       83%       52%       74%       52%         65%

MDD  8/31/1999  4.44% --  9/1/1987  3.97% --  9/1/2015  3.77%


SPX summary for all years 1928 - 2022

Averages     -0.09%     0.05%    -0.07%     0.10%    -0.06%      -0.07%

% Winners       46%       65%       50%       61%       63%         64%

MDD 8/31/1998  12.39% --  9/3/1946  11.10% --  9/3/2002  7.38%

September

Since 1963, over all years, the OTC in September has been up 57% of the time with an average loss of -0.3%.  During the 3rd year of the Presidential Cycle September has been up 53% time with an average loss of -0.5%.  The worst September ever, 2001 (-17.0%), the best 2010 (+12.0%)

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 11th 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 black line shows the average during the 3rd 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 3rd year of the Presidential Cycle the SPX has been up 41% of the time with an average loss of -1.1%.  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 daily average performance over all years for the SPX in September in red and the performance during the 3rd year of the Presidential Cycle in black.

Since 1979 the Russell 2000 (R2K) has been up 52% of the time in September with an average loss of -0.7%.  During the 3rd year of the Presidential Cycle the R2K has been up 45% of the time with an average loss of -1.3%.  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 3rd year of the Presidential Cycle in black.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 44% of the time in September with an average loss of -1.0%.  During the 3rd year of the Presidential Cycle the DJIA has been up 44% of the time with an average loss of -1.2%.  The best September ever for the DJIA 1939, +13.5%, the worst 1931 -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 3rd year of the Presidential Cycle in black.

Conclusion

The breadth indicators are all headed downward.

Seasonality is modestly positive for the coming week and until mid September..

The strongest sectors last week were Technology and Healthcare while the weakest were Basic Materials and Banks.

I expect the major averages to be lower on Friday ,September 1 than they were on Friday, August 25. 

Last week the Dow Jones Industrial Average and the Russell 2000 were down while the OTC and SPX were up.  I am calling last week's negative forecast a tie.

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