Technical Market Report For December 30, 2023
The good news is:
- All of the major indices closed less the 1% off their highs for the year. For the Nasdaq composite (OTC), S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) those included all time highs.
The past month was not the best December for the major averages, but it was not far from it. What I found remarkable was volume on the Nasdaq. Typically prices drift upward in late December on what is usually near the lowest volume of the year.
The first chart covers the past year showing the OTC in blue and a 5% trend (39 day EMA) of total Nasdaq volume (OTC Tot Vol) in orange. Dashed vertical lines have been drawn on the 1st trading day of each month.
OTC Tot Vol finished the year at its high for the year after hitting its low for the year in late November.
The next chart is similar to the first one except it covers the year 2022 for comparison.
The next chart is similar to the 2 above except it covers the 2019 which, like the first chart was the 3rd year of the Presidential Cycle.
As you can see, volume-wise the past month was unusual.
The Negatives
The market is overbought.
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. Dashed vertical lines have been drawn on the 1st trading day of each month.
NY NH did confirm the SPX at its new high for the year on Thursday.
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 confirmed the OTC high for the year set on Thursday.
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 finished the week, in comfortably positive territory at 72%.
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 is very strong remaining above 90%.
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 upward move 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 continued its rise.
Summation indices are running totals of oscillator values. Short term momentum indicators applied to summation indices make them nearly binary.
The next chart covers the past 6 months showing the 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.
There is nothing clear about this chart.
The next chart is similar to the one above, except it shows the OTC, in blue, and the index and the SI’s have been generated from Nasdaq breadth data.
No help from this one either.
Seasonality
Next week includes the first 4 trading days of the 4th 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 2023 while SPX data runs from 1928 to 2023. There are summaries for both the 4th year of the Presidential Cycle and all years combined.
Average returns for the coming week have been positive by all measures.
Report includes the first 4 days of January.
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 4 (PY4)
Day1 Day2 Day3 Day4 Totals
1964-4 0.65% 4 1.06% 5 0.14% 1 0.41% 2 2.26%
1968-4 -0.18% 2 -0.36% 3 -0.42% 4 -0.49% 5 -1.45%
1972-4 -0.41% 1 0.25% 2 0.79% 3 0.78% 4 1.40%
1976-4 0.57% 5 0.90% 1 1.92% 2 0.90% 3 4.28%
1980-4 -1.97% 3 -1.48% 4 1.40% 5 0.41% 1 -1.64%
Avg -0.27% 0.07% 0.77% 0.40% 0.97%
1984-4 -0.35% 2 1.20% 3 1.24% 4 1.21% 5 3.31%
1988-4 2.00% 1 1.65% 2 0.77% 3 0.85% 4 5.27%
1992-4 0.02% 4 1.06% 5 0.89% 1 0.73% 2 2.70%
1996-4 0.63% 2 -1.17% 3 -1.58% 4 0.36% 5 -1.76%
2000-4 1.52% 1 -2.00% 2 -0.62% 3 -2.00% 4 -3.10%
Avg 0.76% 0.15% 0.14% 0.23% 1.28%
2004-4 0.17% 5 2.00% 1 0.49% 2 0.99% 3 3.64%
2008-4 -1.61% 3 -0.27% 4 -2.00% 5 -0.21% 1 -4.08%
2012-4 1.67% 2 -0.01% 3 0.81% 4 0.16% 5 2.63%
2016-4 -2.00% 1 -0.24% 2 -1.14% 3 -2.00% 4 -5.38%
2020-4 1.33% 4 -0.79% 5 0.56% 1 -0.03% 2 1.08%
Avg -0.09% 0.14% -0.26% -0.22% -0.42%
OTC summary for PY4 1964 - 2020
Averages 0.14% 0.12% 0.22% 0.14% 0.61%
% Winners 60% 47% 67% 67% 60%
MDD 1/7/2016 5.28% -- 1/6/2000 4.56% -- 1/7/2008 4.03%
OTC summary for all years 1963 - 2023
Averages 0.25% 0.25% 0.17% 0.17% 0.84%
% Winners 59% 62% 60% 63% 67%
MDD 1/7/2016 5.28% -- 1/6/2000 4.56% -- 1/7/2008 4.03%
SPX PY4
Day1 Day2 Day3 Day4 Totals
1932-4 -2.00% 6 -2.00% 1 -0.13% 2 2.00% 3 -2.13%
1936-4 -0.22% 4 1.12% 5 -0.59% 6 -0.45% 1 -0.14%
1940-4 1.12% 2 1.11% 3 -0.31% 4 -0.55% 5 1.37%
1944-4 -0.09% 1 1.29% 2 1.10% 3 -0.42% 4 1.88%
1948-4 0.26% 5 -0.91% 1 -0.33% 2 0.53% 3 -0.45%
1952-4 0.13% 3 0.34% 4 0.17% 5 0.08% 6 0.71%
1956-4 -0.70% 2 -0.35% 3 -0.11% 4 0.42% 5 -0.75%
1960-4 0.03% 1 0.80% 2 -0.43% 3 -0.73% 4 -0.33%
Avg -0.07% 0.23% 0.08% -0.02% 0.21%
1964-4 0.55% 4 0.09% 5 0.23% 1 0.03% 2 0.89%
1968-4 -0.37% 2 -0.46% 3 -0.32% 4 0.61% 5 -0.55%
1972-4 -0.41% 1 0.41% 2 0.96% 3 0.43% 4 1.39%
1976-4 0.79% 5 1.85% 1 1.03% 2 0.45% 3 4.11%
1980-4 -2.00% 3 -0.51% 4 1.24% 5 0.27% 1 -1.00%
Avg -0.29% 0.28% 0.62% 0.36% 0.97%
1984-4 -0.54% 2 1.67% 3 1.22% 4 0.28% 5 2.63%
1988-4 2.00% 1 1.05% 2 0.10% 3 0.84% 4 3.99%
1992-4 0.04% 4 0.50% 5 -0.33% 1 -0.13% 2 0.08%
1996-4 0.78% 2 0.10% 3 -0.58% 4 -0.16% 5 0.13%
2000-4 -0.96% 1 -2.00% 2 0.19% 3 0.10% 4 -2.67%
Avg 0.26% 0.26% 0.12% 0.19% 0.83%
2004-4 -0.31% 5 1.24% 1 0.13% 2 0.24% 3 1.30%
2008-4 -1.44% 3 0.00% 4 -2.00% 5 0.32% 1 -3.12%
2012-4 1.55% 2 0.02% 3 0.29% 4 -0.25% 5 1.61%
2016-4 -1.53% 1 0.20% 2 -1.31% 3 -2.00% 4 -4.64%
2020-4 0.84% 4 -0.71% 5 0.35% 1 -0.28% 2 0.20%
Avg -0.18% 0.15% -0.51% -0.39% -0.93%
SPX summary for PY4 1932 - 2020
Averages -0.11% 0.21% 0.02% 0.07% 0.20%
% Winners 48% 65% 52% 61% 57%
MDD 1/7/2016 4.57% -- 1/5/1932 4.09% -- 1/4/2008 3.41%
SPX summary for all years 1928 - 2023
Averages 0.05% 0.37% -0.01% 0.05% 0.46%
% Winners 48% 71% 50% 55% 63%
MDD 1/7/2016 4.57% -- 1/7/1991 4.48% -- 1/6/1955 4.19%
January
Since 1963, over all years, the OTC in January has been up 65% of the time in January with an average gain of 2.7%. During the 4th year of the Presidential Cycle January has been up 67% time with an average gain of 1.5%. The best ever January for the OTC was 1975 (+16.6%), the worst 2008 (-9.9%).
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 January over all years since 1963 while the green line shows the average during the 4th year of the Presidential Cycle over the same period.
Since 1928 the SPX has been up 63% of the time in January with an average gain of 1.2%. During the 4th year of the Presidential Cycle the SPX has been up 50% of the time with on average no gain or loss. The best ever January for the SPX was 1987 (+13.2%) the worst 2009 (-8.6%).
The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in January in red and the performance during the 4th year of the Presidential Cycle in green.
Since 1979 the Russell 2000 (R2K) has been up 56% of the time in January with an average gain of 1.5%. During the 4th year of the Presidential Cycle the R2K has been up 45% of the time in January with an average gain of 0.8%. The best ever January for the R2K 1985 (+13.1%) the worst 2009 (-11.2%)
The chart below is similar to those above except it shows the daily performance over all years of the R2K in January in magenta and the performance during the 4th year of the Presidential Cycle in green.
Since 1885 the Dow Jones Industrial Average (DJIA) has been up 62% of the time in January with an average gain of 0.9%. During the 4th year of the Presidential Cycle the DJIA has been up 50% of the time in January with an average loss of -.02%. The best January ever for the DJIA was 1976 (+14.4%), the worst 2009 (-8.8%).
The chart below is similar to those above except it shows the daily performance over all years of the DJIA in January in blue and the performance during the 4th year of the Presidential Cycle in green.
Conclusion
The market is setting price records with volume records during a seasonal period not known for that kind of behavior.
The strongest sectors last week were Health care and Finance while the weakest were Precious metals and Energy.
I expect the major averages to be higher on Friday January 5 than they were on Friday December 29.
My weekly forecasts had a bad year with a little less than 50% accuracy.
There were more ties than usual last year. The score goes back to 0/0/0 after this report.
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