Technical Market Report For July 1, 2023
The good news is:
- The Nasdaq composite (OTC), S&P 500 (SPX) and Dow Jones Industrial Average all closed at their highs for the year last Friday.
The Negatives
New lows have disappeared on the NYSE and declined considerably on the Nasdaq. At least for now, the negatives have disappeared.
The Positives
The market made a sharp turn upward following the extremely high downside volume of the previous week
The first 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).
Although not visible on the chart, OTC HL Ratio rose into positive territory (52) last Friday.
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 turned upward last week.
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 rose sharply, but, failed to confirm the recent SPX high by a small margin.
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 previous OTC high, but came up short of confirming last Friday’s yearly high.
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 turned slightly upward 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 turned upward last week.
Summation indices are running totals of oscillator values.
Short term momentum indicators applied to summation indices make them binary so position is most important.
The first chart covers the past 6 months showing 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 (short interest) momentum indicators all appeared to turn upward last week.
The next chart is similar to the one above, except is shows the OTC, in blue, as the index and the SI’s have been generated from Nasdaq data.
All of Nasdaq SI momentum, except the up down volume SI appeared to have turned upward on Friday.
Seasonality
Next week includes the first 4 trading days of July 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 positive by all measures and very strong during the 3rd year of the Presidential Cycle.
Report for the first 4 days of July.
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)
Day1 Day2 Day3 Day4 Totals
1963-3 -0.12% 1 -0.30% 2 0.30% 3 0.30% 5 0.18%
1967-3 0.49% 1 -0.10% 3 0.17% 4 -0.01% 5 0.55%
1971-3 0.62% 4 0.28% 5 0.42% 2 0.71% 3 2.04%
1975-3 -0.79% 2 -0.80% 3 0.65% 4 -0.70% 1 -1.63%
1979-3 -0.83% 1 0.04% 2 0.55% 4 0.62% 5 0.38%
Avg -0.13% -0.18% 0.42% 0.18% 0.30%
1983-3 0.90% 5 -1.38% 2 0.63% 3 -0.04% 4 0.11%
1987-3 -0.05% 3 0.33% 4 -0.18% 1 -0.13% 2 -0.03%
1991-3 1.13% 1 -0.53% 2 -0.93% 3 -0.06% 5 -0.38%
1995-3 0.12% 1 0.78% 3 1.18% 4 1.77% 5 3.84%
1999-3 0.77% 4 1.29% 5 -0.15% 2 0.23% 3 2.13%
Avg 0.57% 0.10% 0.11% 0.35% 1.13%
2003-3 1.07% 2 2.35% 3 -0.91% 4 3.44% 1 5.95%
2007-3 1.12% 1 0.48% 2 0.44% 4 0.37% 5 2.41%
2011-3 1.53% 5 0.35% 2 0.29% 3 1.36% 4 3.53%
2015-3 0.53% 3 -0.08% 4 -0.34% 1 0.11% 2 0.21%
2019-3 1.06% 1 0.22% 2 0.75% 3 -0.10% 5 1.93%
Avg 1.06% 0.66% 0.05% 1.04% 2.81%
OTC summary for PY3 1963 - 2019
Averages 0.50% 0.20% 0.19% 0.52% 1.41%
% Winners 73% 60% 67% 60% 80%
MDD 7/7/1975 1.63% -- 7/5/1991 1.51% -- 7/5/1983 1.38%
OTC summary for all years 1963 - 2022
Averages 0.18% -0.15% 0.10% 0.18% 0.31%
% Winners 65% 52% 55% 55% 65%
MDD 7/6/2001 7.24% -- 7/2/2002 7.20% -- 7/7/2009 5.39%
SPX PY3
Day1 Day2 Day3 Day4 Totals
1931-3 1.62% 3 -0.86% 4 2.14% 5 -1.05% 1 1.85%
1935-3 0.49% 1 0.10% 2 0.58% 3 1.16% 5 2.33%
1939-3 1.01% 6 0.27% 1 1.82% 3 -0.09% 4 3.02%
1943-3 0.08% 4 -0.08% 5 0.16% 6 0.00% 2 0.16%
1947-3 1.64% 2 -0.13% 3 1.04% 4 0.06% 1 2.61%
1951-3 0.67% 1 0.62% 2 1.93% 4 0.00% 5 3.22%
1955-3 0.39% 5 1.21% 2 3.57% 3 -1.39% 4 3.79%
1959-3 0.86% 3 0.53% 4 0.62% 1 0.60% 2 2.61%
Avg 0.73% 0.43% 1.47% -0.14% 2.48%
1963-3 -0.74% 1 0.87% 2 0.69% 3 0.40% 5 1.23%
1967-3 0.30% 1 0.49% 3 -0.04% 4 0.41% 5 1.15%
1971-3 0.08% 4 0.00% 5 -0.02% 2 0.28% 3 0.34%
1975-3 -0.36% 2 -0.71% 3 0.19% 4 -0.87% 1 -1.74%
1979-3 -0.89% 1 0.10% 2 0.33% 4 1.16% 5 0.70%
Avg -0.32% 0.15% 0.23% 0.28% 0.34%
1983-3 0.48% 5 -1.37% 2 1.13% 3 -0.55% 4 -0.31%
1987-3 -0.35% 3 0.89% 4 -0.23% 1 0.81% 2 1.12%
1991-3 1.82% 1 -0.12% 2 -1.10% 3 0.20% 5 0.81%
1995-3 0.43% 1 0.03% 3 1.23% 4 0.43% 5 2.12%
1999-3 0.60% 4 0.74% 5 -0.22% 2 0.56% 3 1.68%
Avg 0.60% 0.03% 0.16% 0.29% 1.08%
2003-3 0.80% 2 1.16% 3 -0.81% 4 1.90% 1 3.06%
2007-3 1.07% 1 0.36% 2 0.03% 4 0.33% 5 1.79%
2011-3 1.44% 5 -0.13% 2 0.10% 3 1.05% 4 2.45%
2015-3 0.69% 3 -0.03% 4 -0.39% 1 0.61% 2 0.88%
2019-3 0.77% 1 0.29% 2 0.77% 3 -0.18% 5 1.65%
Avg 0.95% 0.33% -0.06% 0.74% 1.97%
SPX summary for PY3 1931 - 2019
Averages 0.56% 0.18% 0.59% 0.25% 1.59%
% Winners 83% 61% 70% 65% 91%
MDD 7/7/1975 1.73% -- 7/7/1955 1.39% -- 7/5/1983 1.37%
SPX summary for all years 1928 - 2022
Averages 0.34% 0.17% 0.31% 0.08% 0.89%
% Winners 73% 59% 62% 58% 72%
MDD 7/7/2009 4.58% -- 7/2/2002 4.30% -- 7/6/2001 3.73%
July
Since 1963, over all years the OTC in July has been up 57% of the time with an average gain of 0.8%. During the 3rd year of the Presidential Cycle July has been up 53% time with an average gain of 1.2%. The worst July ever, 2002 (-9.2%), the best 2022 (+12.3%)
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 July over all years since 1963 while the black line shows the average during the 3rd year of the Presidential Cycle.
Since 1928 the SPX has been up 60% of the time in July with an average gain of 1.7%. During the 3rd year of the Presidential Cycle the SPX has been up 61% of the time with an average gain of 1.1%. The best ever July for the SPX was 1932 (+37.7%) the worst 1934 (-11.5%).
The chart below is similar to the one above except it shows the daily performance over all years for the SPX in July 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 July with an average change of 0.0%. During the 3rd year of the Presidential Cycle the R2K has been up 55% of the time with an average gain of 0.4%. The best ever July for the R2K, 1980 (+11.0%), the worst 2002 (-15.2%)
The chart below is similar to those above except it shows the daily performance over all years of the R2K in July 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 63% of the time in July with an average gain of 1.3%. During the 3rd year of the Presidential Cycle the DJIA has been up 59% of the time with an average gain of 0.7%. The best July ever for the DJIA 1932 (+26.7%), the worst 1893 (-15.7%)
The chart below is similar to those above except it shows the daily performance over all years of the DJIA in July in grey and the performance during the 3rd year of the Presidential Cycle in black.
Conclusion
The market has been following the seasonal pattern for the 3rd year of the Presidential Cycle pretty closely. Typically that pattern changes (goes negative) around mid July and stays that way until October.
The strongest sectors last week were Energy and Transportation while the weakest were Utilities (for the 2nd week) and Precious Metals (for the 7th week in a row).
I expect the major averages to be higher on Friday, July 7 than they were on Friday, June 30.
Last week's negative forecast was a miss.
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