The good news is:

• Seasonality for the coming week has been very strong.

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 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 back into negative territory last week. 

The next chart covers the last 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.  

NY NH declined sharply after failing 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 resumed its sharp decline after failing to confirm the index high on Monday.

The Positives

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

NY HL ratio declined, but remained in positive territory.  

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 moved 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 moved slightly 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 are mixed; volume is low and moving upward while advance – decline and new high/new low indicators are high and turning downward.  A lot of indecision in this chart and the next one .

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 indicators are similar to the same indicators on the NYSE. 

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday 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 1953 to 2022.  There are summaries for both the 3rd 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 positive by all measures and very strong during the 3rd year of the Presidential Cycle. 

Report for the week before the 2nd Friday of July.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday to 2nd Friday.


OTC Presidential Year 3 (PY3)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1963-3   0.21%  -0.27%   0.30%   0.29%   0.12%   0.65%

 1967-3   0.71%   0.23%   0.70%  -0.18%   0.25%   1.72%

 1971-3   0.00%   0.42%   0.71%   0.37%   0.44%   1.95%

 1975-3   0.44%   0.48%  -0.69%  -0.30%  -0.13%  -0.20%

 1979-3   0.37%  -0.13%  -0.09%  -0.12%  -0.12%  -0.09%


 Avg      0.43%   0.15%   0.19%   0.01%   0.11%   0.81%


 1983-3   0.00%  -1.38%   0.63%  -0.04%   0.18%  -0.62%

 1987-3   0.12%   1.08%   0.02%   0.46%   0.20%   1.89%

 1991-3   1.15%   0.86%   0.73%   0.25%   0.89%   3.88%

 1995-3   0.71%  -0.66%   1.90%   0.56%   0.52%   3.03%

 1999-3   0.00%  -0.15%   0.23%   1.05%   0.76%   1.89%


 Avg      0.66%  -0.05%   0.70%   0.45%   0.51%   2.01%


 2003-3   1.20%  -0.09%  -0.30%  -2.86%   0.62%  -1.43%

 2007-3   0.13%  -1.16%   0.48%   1.88%   0.20%   1.53%

 2011-3   0.00%   0.35%   0.29%   1.36%  -0.45%   1.55%

 2015-3   1.48%   0.66%  -0.12%   1.26%   0.91%   4.19%

 2019-3  -0.78%   0.54%   0.75%  -0.08%   0.59%   1.01%


 Avg      0.51%   0.06%   0.22%   0.31%   0.37%   1.37%


OTC summary for PY3 1963 - 2019 

 Avg      0.52%   0.05%   0.37%   0.26%   0.33%   1.40%

 Win%       91%     53%     73%     60%     80%     73%


OTC summary for all years 1963 - 2022

 Avg      0.04%  -0.05%   0.35%   0.32%   0.44%   1.08%

 Win%       67%     55%     63%     65%     78%     70%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3   0.00%   1.21%   3.57%  -1.39%   0.14%   3.54%

 1959-3  -0.83%   0.24%   0.07%  -0.30%  -0.37%  -1.20%


 1963-3  -0.68%   0.43%  -0.21%  -0.19%  -0.17%  -0.83%

 1967-3   0.39%   0.47%  -0.09%   0.02%   0.35%   1.14%

 1971-3   0.00%  -0.02%   0.28%   0.30%   0.35%   0.91%

 1975-3   0.56%   0.44%  -1.05%  -1.04%  -0.46%  -1.54%

 1979-3   0.82%  -0.26%  -0.54%  -0.92%  -0.36%  -1.25%


 Avg      0.27%   0.21%  -0.32%  -0.36%  -0.06%  -0.31%


 1983-3   0.00%  -1.37%   1.13%  -0.55%  -0.29%  -1.07%

 1987-3  -0.24%   0.99%  -0.08%   0.73%   0.60%   2.01%

 1991-3   1.03%  -0.48%  -0.10%   0.33%   0.87%   1.65%

 1995-3   0.15%  -0.43%   1.10%   0.02%  -0.20%   0.64%

 1999-3   0.00%  -0.22%   0.56%  -0.11%   0.64%   0.87%


 Avg      0.31%  -0.30%   0.52%   0.09%   0.33%   0.82%


 2003-3   0.57%  -0.34%  -0.64%  -1.23%   1.18%  -0.47%

 2007-3   0.09%  -1.42%   0.57%   1.91%   0.31%   1.46%

 2011-3   0.00%  -0.13%   0.10%   1.05%  -0.70%   0.32%

 2015-3   1.11%   0.45%  -0.07%   0.80%   0.11%   2.39%

 2019-3  -0.48%   0.12%   0.45%   0.23%   0.46%   0.78%


 Avg      0.32%  -0.27%   0.08%   0.55%   0.27%   0.90%


SPX summary for PY3 1955 - 2019 

 Avg      0.21%  -0.02%   0.30%  -0.02%   0.15%   0.55%

 Win%       67%     47%     53%     53%     59%     65%


SPX summary for all years 1953 - 2022

 Avg      0.04%  -0.01%   0.27%   0.17%   0.31%   0.78%

 Win%       59%     47%     61%     61%     70%     71%

Conclusion

The market has been following the seasonal pattern for the 3rd year of the Presidential Cycle pretty closely.  Next week is the last seasonally strong week for a while.  On average many indices see their yearly high in mid July during the 3rd year of the Presidential Cycle.

The strongest sectors last week were Energy and Transportation (same as the previous week) while the weakest were Health Care and Precious Metals (for the 8th week in a row).

I expect the major averages to be higher on Friday, July 14 than they were on Friday, July 7.

Last week's positive forecast was a miss.

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