Technical Market Report For July 29, 2023

The good news is:

  • The S&P 500 (SPX) closed at its high for the year last Friday.

 

The Negatives

The market is overbought.

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 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 are mixed; NY HL Mom headed downward while the other 2 remained at the top of the chart..

 

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’s have all headed downward. 

 

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 downward last week.

 

The Positives

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 upward 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 vertical lines have been drawn on the first 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 fell, but remained in positive 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 above 90% all week, very strong. 

 

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 nearly confirmed Friday’s SPX high for the year.

 

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 declined a bit last week from its high for the year set the previous week.

 

Seasonality

Next week includes the last trading day of July and the first 4 trading days 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 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 mostly negative and weaker during the 3rd year of the Presidential Cycle than other years. 

 

Report for the last day of July and first 4 days of August.

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      Day1        Day2        Day3        Day4      Totals

 1963-3       0.90% 3  -0.27% 4  -0.12% 5   0.24% 1   0.33% 2     1.08%

 1967-3       0.09% 1   0.44% 2   0.50% 3   0.69% 4   0.04% 5     1.74%

 1971-3      -0.51% 5   0.30% 1  -1.12% 2  -1.10% 3  -0.15% 4    -2.57%

 1975-3       0.19% 4  -1.65% 5  -1.03% 1  -1.00% 2   0.09% 3    -3.39%

 1979-3       0.56% 2   0.40% 3   0.45% 4   0.06% 5  -0.15% 1     1.33%

 Avg            0.25%    -0.15%    -0.26%    -0.22%     0.03%      -0.36%


 1983-3      -1.54% 5  -0.53% 1   0.36% 2   0.22% 3  -1.37% 4    -2.85%

 1987-3       0.31% 5  -0.41% 1  -0.08% 2   0.81% 3   1.04% 4     1.66%

 1991-3       0.76% 3   0.42% 4   0.30% 5  -0.61% 1   0.52% 2     1.39%

 1995-3      -0.41% 1  -1.01% 2  -0.74% 3  -0.11% 4   0.85% 5    -1.41%

 1999-3      -0.06% 5  -0.56% 1  -1.36% 2  -1.85% 3   1.02% 4    -2.82%

 Avg           -0.19%    -0.42%    -0.30%    -0.31%     0.41%      -0.81%


 2003-3       0.82% 4  -1.12% 5  -0.09% 1  -2.37% 2  -1.24% 3    -4.00%

 2007-3      -1.43% 2   0.30% 3   0.87% 4  -2.51% 5   1.44% 1    -1.34%

 2011-3      -0.36% 5  -0.43% 1  -2.75% 2   0.89% 3  -5.08% 4    -7.71%

 2015-3      -0.01% 5  -0.25% 1  -0.19% 2   0.67% 3  -1.62% 4    -1.40%

 2019-3      -1.19% 3  -0.79% 4  -1.32% 5  -3.47% 1   1.39% 2    -5.38%

 Avg         -0.43%    -0.46%    -0.70%    -1.36%    -1.02%      -3.97%


OTC summary for PY3 1963 - 2019

Averages     -0.13%    -0.34%    -0.42%    -0.63%    -0.19%      -1.71%

% Winners       47%       33%       33%       47%       60%         33%

MDD  8/4/2011  7.59% --  8/5/2019  6.62% --  8/6/2003  4.75%


OTC summary for all years 1963 - 2022

Averages     -0.01%     0.00%    -0.15%    -0.06%     0.06%      -0.16%

% Winners       50%       54%       40%       53%       67%         50%

MDD 8/5/2002  10.28% --  8/6/1990  8.95% --  8/4/2011  7.59%

SPX PY3

               Day1      Day1      Day2      Day3      Day4      Totals

 1931-3      -0.51% 5   0.80% 6   0.65% 1  -0.65% 2  -1.45% 3    -1.15%

 1935-3       1.28% 3  -0.36% 4  -0.82% 5   1.55% 6   0.72% 1     2.38%

 1939-3      -0.58% 1   0.00% 2   1.00% 3  -0.33% 4  -1.82% 5    -1.73%


 1943-3      -1.43% 6  -1.80% 1   2.18% 2   0.60% 3  -0.34% 4    -0.79%

 1947-3       1.55% 4   0.25% 5  -1.14% 1   0.32% 2  -0.32% 3     0.66%

 1951-3      -1.02% 2   0.49% 3   1.38% 4   0.13% 5   0.70% 1     1.68%

 1955-3       0.05% 5  -1.36% 1   0.23% 2   0.14% 3  -1.69% 4    -2.63%

 1959-3       0.02% 5   0.33% 1  -0.16% 2  -0.51% 3  -0.10% 4    -0.43%

 Avg         -0.17%    -0.42%     0.50%     0.14%    -0.35%      -0.30%


 1963-3      -0.16% 3  -0.09% 4   0.33% 5   0.59% 1   0.66% 2     1.34%

 1967-3       0.28% 1   0.65% 2   0.43% 3  -0.13% 4   0.18% 5     1.41%

 1971-3      -0.46% 5   0.40% 1  -1.51% 2  -0.66% 3   0.21% 4    -2.01%

 1975-3      -0.09% 4  -0.86% 5  -0.95% 1  -1.06% 2   0.02% 3    -2.93%

 1979-3       0.64% 2   0.35% 3  -0.07% 4  -0.06% 5   0.25% 1     1.11%

 Avg          0.04%     0.09%    -0.35%    -0.26%     0.26%      -0.22%


 1983-3      -1.50% 5  -0.32% 1  -0.02% 2   0.88% 3  -1.29% 4    -2.25%

 1987-3       0.19% 5  -0.34% 1  -0.42% 2   0.70% 3   1.14% 4     1.27%

 1991-3       0.29% 3  -0.18% 4   0.02% 5  -0.55% 1   1.44% 2     1.02%

 1995-3      -0.15% 1  -0.43% 2  -0.15% 3  -0.01% 4   0.03% 5    -0.71%

 1999-3      -0.92% 5  -0.05% 1  -0.44% 2  -1.27% 3   0.64% 4    -2.04%

 Avg         -0.42%    -0.26%    -0.20%    -0.05%     0.39%      -0.54%


 2003-3       0.29% 4  -1.03% 5   0.27% 1  -1.77% 2   0.17% 3    -2.06%

 2007-3      -1.26% 2   0.72% 3   0.44% 4  -2.66% 5   2.42% 1    -0.35%

 2011-3      -0.65% 5  -0.41% 1  -2.56% 2   0.50% 3  -4.78% 4    -7.89%

 2015-3      -0.23% 5  -0.28% 1  -0.22% 2   0.31% 3  -0.78% 4    -1.19%

 2019-3      -1.09% 3  -0.90% 4  -0.73% 5  -2.98% 1   1.30% 2    -4.39%


 Avg         -0.59%    -0.38%    -0.56%    -1.32%    -0.33%      -3.18%


SPX summary for PY3 1931 - 2019

Averages     -0.24%    -0.19%    -0.10%    -0.30%    -0.12%      -0.94%

% Winners       39%       35%       43%       43%       61%         35%

MDD  8/4/2011  7.73% --  8/5/2019  5.59% --  8/2/1943  3.21%


SPX summary for all years 1928 - 2022

Averages      0.06%     0.09%    -0.03%     0.10%    -0.12%       0.10%

% Winners       60%       51%       49%       53%       49%         55%

MDD 8/5/2002  8.45% --  8/4/2011  7.73% --  8/4/1998  6.19%

 

August

Since 1963, over all years, the OTC, in August, has been up 60% of the time with an average gain of 0.5%.  During the 3rd year of the Presidential Cycle August has been up 67% time with an average gain of 0.7%.  The worst August ever, 1998 (-19.9%), the best 2000 (+11.7%)

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 August 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 59% of the time in August with an average gain of 0.7%.  During the 3rd year of the Presidential Cycle the SPX has been up 52% of the time with an average gain of 0.1%.  The best ever August for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).

The chart below is similar to the one above except it shows the daily performance over all years for the SPX in August in red and the performance during the 3rd year of the Presidential Cycle in black.

There must have been some large moves in the middle of Augusts past because there is a significant discrepancy between what is shown on the chart and the actual averages.  Prior to 1953 the market traded 6 days a week so a lot of middle of the month data has been left out. 

 

Since 1979 the Russell 2000 (R2K) has been up 57% of the time in August with an average gain of 0.3%.  During the 3rd year of the Presidential Cycle the R2K has been up 55% of the time with an average loss of -0.5%.  The best ever August for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)

The chart below is similar to those above except it shows the daily performance over all years of the R2K in August 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 64% of the time in August with an average gain of 1.2%.  During the 3rd year of the Presidential Cycle the DJIA has been up 68% of the time with an average gain of 0.9%.  The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in August in grey and the performance during the 3rd year of the Presidential Cycle in black.

 

Conclusion

The market is overbought.  

A few of the breadth indicators have headed downward.

Seasonality is negative for the coming week.

The strongest sectors last week were Energy and Banks while the weakest were Precious metals and Telecom (for the 3rd week).

I expect the major averages to be lower on Friday August 4 than they were on Friday July 28. 

Last week's negative forecast was a miss..

 

 


More By This Author:

Technical Market Report For July 22, 2023
Technical Market Report For July 15, 2023
Technical Market Report For July 8, 2023
How did you like this article? Let us know so we can better customize your reading experience.

Comments