The good news is:

• Seasonality turns modestly positive late next week.  

The Negatives

The first chart covers the past 6 months showing the Nasdaq composite (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 remained in negative territory. 

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

NY HL ratio fell back into negative territory.

The next chart covers the past 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 turned downward from a high level (high and increasing numbers of new lows).

The next chart is similar to the above except it shows the SPX in red and NY NL in blue has been calculated with NYSE data.

NY NL flattened out at level representing an uncomfortably high number of new lows.

The next chart covers the last 6 months showing the OTC in blue and a 10% trend (19 day EMA) of Nasdaq new highs (OTC NH) in green. 

OTC NH fell last week following the index downward.

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

NY NH ditto.

The Positives

Seasonality turns modestly positive late next week and improves as the month goes on.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of December 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 and weaker during the 2nd year of the Presidential Cycle than other years. 

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

The number following the year is the position in the Presidential Cycle. Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2   0.58%   0.65%   0.09%   0.04%  -0.57%   0.78%

 1970-2   0.35%  -0.74%  -0.14%   0.11%   0.28%  -0.13%

 1974-2  -0.62%   0.58%   0.74%  -0.29%  -1.33%  -0.92%

 1978-2   0.32%  -0.55%  -0.31%   0.02%  -0.63%  -1.15%


 1982-2  -0.22%  -0.86%  -2.44%  -0.04%   1.48%  -2.08%

 1986-2  -0.73%   0.13%  -0.42%  -0.26%   0.24%  -1.04%

 1990-2  -0.84%   1.22%   0.28%   0.29%   0.35%   1.30%

 1994-2   0.01%   0.05%   0.86%   0.69%  -0.22%   1.39%

 1998-2  -3.07%   2.32%  -0.16%   1.72%   2.06%   2.87%


 Avg     -0.97%   0.57%  -0.37%   0.48%   0.78%   0.49%


 2002-2   2.78%  -0.59%  -2.19%  -0.54%   0.66%   0.11%

 2006-2   0.23%  -0.46%   0.03%   0.88%   0.14%   0.82%

 2010-2  -0.48%   0.11%  -0.40%   0.77%   0.21%   0.21%

 2014-2  -1.04%  -1.24%   2.12%   2.24%   0.36%   2.43%

 2018-2  -2.27%   0.45%  -2.17%  -1.63%  -2.99%  -8.62%


 Avg     -0.16%  -0.35%  -0.52%   0.34%  -0.32%  -1.01%


OTC summary for PY2 1966 - 2018 

 Avg     -0.36%   0.08%  -0.29%   0.29%   0.00%  -0.29%

 Win%       43%     57%     43%     64%     64%     57%


OTC summary for all years 1963 - 2021

 Avg     -0.05%   0.11%   0.01%  -0.05%   0.12%   0.14%

 Win%       51%     53%     52%     58%     58%     59%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2   0.09%  -0.69%   0.61%   1.07%   0.26%   1.33%

 1958-2   0.28%   0.37%   0.65%   0.43%  -0.15%   1.59%


 1962-2  -0.32%  -0.48%   0.82%   0.38%  -0.29%   0.12%

 1966-2   1.05%  -0.33%  -0.11%  -1.21%  -0.07%  -0.67%

 1970-2  -0.51%  -0.16%   0.07%   0.36%   0.20%  -0.04%

 1974-2  -0.91%   1.69%   0.47%  -0.37%  -1.09%  -0.21%

 1978-2   0.50%  -0.54%  -0.55%  -0.02%  -0.74%  -1.35%


 Avg     -0.04%   0.04%   0.14%  -0.17%  -0.40%  -0.43%


 1982-2   0.27%  -1.83%  -1.56%   0.04%   1.62%  -1.46%

 1986-2   0.35%   0.74%  -0.99%  -0.32%   1.20%   0.97%

 1990-2  -0.24%   1.24%   0.05%  -0.02%   0.49%   1.51%

 1994-2   0.56%   0.15%   1.07%   0.08%   0.76%   2.62%

 1998-2  -2.17%   1.89%  -0.07%   1.55%   0.68%   1.88%


 Avg     -0.25%   0.44%  -0.30%   0.27%   0.95%   1.11%


 2002-2   2.35%  -0.81%  -1.31%  -0.77%   1.30%   0.75%

 2006-2   0.23%  -0.10%   0.12%   0.87%   0.11%   1.22%

 2010-2   0.00%   0.09%  -0.51%   0.62%   0.08%   0.29%

 2014-2  -0.63%  -0.85%   2.04%   2.40%   0.46%   3.41%

 2018-2  -2.08%   0.01%  -1.54%  -1.58%  -2.06%  -7.24%


 Avg     -0.03%  -0.33%  -0.24%   0.31%  -0.02%  -0.31%


SPX summary for PY2 1954 - 2018 

 Avg     -0.07%   0.02%  -0.04%   0.21%   0.16%   0.28%

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


SPX summary for all years 1953- 2021

 Avg      0.01%   0.18%   0.08%  -0.03%   0.10%   0.33%

 Win%       54%     53%     51%     48%     58%     61%

Conclusion

The weakness last week was seasonal and that pattern continues for a few more days.

The strongest sectors last week were Precious metals (for the 5th week in a row) and Utilities while the weakest were Banks (for the 2nd week in a row) and Energy (for the 5th week in a row).

I expect the major averages to be lower on Friday, December 16, than they were on Friday, December 9.

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