The good news is:

• Both the Nasdaq composite (OTC) and the S&P 500 (SPX) closed at their highs for this year last Thursday.

The Negatives

The first 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 the month.

NY NH also moved sharply upward last week, but remains short of confirming the new SPX high.

The Positives

New lows declined significantly on both markets last week while new highs expanded.

The next chart is similar to the one above except it shows the OTC in green and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH moved sharply upward and confirmed the new OTC high.

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 continued its climb into 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 moved further into positive territory last week.  

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 moving 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 continued its move 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 next 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.  

NYSE SI’s momentum indicators are at the top of the chart..

The next chart is similar to the one above, except is shows the OTC as the index and the SI’s have been generated from Nasdaq data.  

All of Nasdaq SI momentum indicators are also at the top of the chart. 

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of June 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 modestly negative by all measures.. 

Report for the week before the 4th Friday of June.

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

Daily returns from Monday through the 4th Friday.


OTC Presidential Year 3 (PY3)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1963-3   0.41%   0.20%  -0.41%  -0.79%  -0.35%  -0.94%

 1967-3   1.04%   0.01%   0.33%  -0.58%   0.24%   1.03%

 1971-3  -1.53%  -0.95%   0.47%   0.36%   0.18%  -1.47%

 1975-3   0.62%   0.54%   0.08%   0.17%   0.06%   1.47%

 1979-3  -0.29%   0.15%   0.29%   0.19%   0.39%   0.73%


 Avg      0.05%  -0.01%   0.15%  -0.13%   0.10%   0.16%


 1983-3  -0.45%   0.41%   0.68%  -0.26%   0.48%   0.86%

 1987-3   0.04%  -0.30%  -0.17%  -0.01%  -0.12%  -0.56%

 1991-3  -2.18%  -0.41%  -0.05%   0.67%  -0.07%  -2.03%

 1995-3   1.48%   0.84%  -0.07%   1.17%  -0.13%   3.29%

 1999-3   2.61%  -1.90%   0.69%  -1.70%  -0.05%  -0.35%


 Avg      0.30%  -0.27%   0.22%  -0.03%   0.02%   0.24%


 2003-3  -2.07%  -0.32%  -0.18%   1.96%  -0.54%  -1.15%

 2007-3   0.00%   0.01%  -1.02%   0.65%  -1.07%  -1.43%

 2011-3   0.50%   2.19%  -0.67%   0.66%  -1.26%   1.42%

 2015-3   0.72%   0.12%  -0.73%  -0.20%  -0.62%  -0.71%

 2019-3  -0.32%  -1.51%   0.32%   0.73%   0.48%  -0.30%


 Avg     -0.23%   0.10%  -0.46%   0.76%  -0.60%  -0.43%


 OTC summary for PY3 1963 - 2019

 Avg      0.04%  -0.06%  -0.03%   0.20%  -0.16%  -0.01%

 Win%       53%     60%     47%     60%     40%     40%


OTC summary for all years 1963 - 2022

 Avg     -0.07%   0.09%   0.09%   0.00%  -0.13%  -0.03%

 Win%       47%     61%     53%     61%     53%     51%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3   0.10%   0.92%   0.22%   0.37%   0.52%   2.13%

 1959-3   0.00%  -0.02%   0.51%   0.03%   0.96%   1.48%


 1963-3  -0.07%  -0.23%  -0.90%  -0.49%   0.43%  -1.25%

 1967-3  -0.03%  -0.03%  -0.30%  -0.25%   0.03%  -0.58%

 1971-3  -1.11%  -0.29%   0.84%  -0.24%  -0.18%  -0.98%

 1975-3   1.09%   0.61%   0.46%   0.20%   0.00%   2.36%

 1979-3  -0.52%   0.02%   0.05%   0.45%   0.54%   0.54%


 Avg     -0.13%   0.02%   0.03%  -0.07%   0.21%   0.01%


 1983-3  -0.07%   0.89%   0.27%  -0.25%  -0.10%   0.75%

 1987-3   0.87%  -0.39%  -0.51%   0.68%  -0.58%   0.07%

 1991-3  -1.80%  -0.08%   0.25%   0.76%  -0.87%  -1.74%

 1995-3   1.00%  -0.04%  -0.18%   1.30%  -0.25%   1.83%

 1999-3   0.45%  -0.97%  -0.21%  -1.30%  -0.04%  -2.06%


 Avg      0.09%  -0.12%  -0.08%   0.24%  -0.37%  -0.23%


 2003-3  -1.31%   0.18%  -0.83%   1.08%  -0.97%  -1.85%

 2007-3  -0.12%   0.17%  -1.36%   0.62%  -1.29%  -1.98%

 2011-3   0.54%   1.34%  -0.65%  -0.28%  -1.17%  -0.22%

 2015-3   0.61%   0.06%  -0.74%  -0.30%  -0.04%  -0.40%

 2019-3  -0.17%  -0.95%  -0.12%   0.38%   0.58%  -0.29%


 Avg     -0.09%   0.16%  -0.74%   0.30%  -0.58%  -0.95%


SPX summary for PY3 1955 - 2019 

 Avg     -0.03%   0.07%  -0.19%   0.16%  -0.15%  -0.13%

 Win%       44%     47%     41%     59%     38%     41%


SPX summary for all years 1953 - 2022

 Avg     -0.14%   0.15%   0.00%  -0.02%  -0.15%  -0.15%

 Win%       42%     57%     49%     52%     46%     49%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart, made with FastTrack, covers the past 5 years showing the SPX in red and M2 money supply in green.

Money supply has been declining slowly since late 2021.

Treasury rates at their close last Friday and their changes from last month:

• 2yr yield 4.720% up from 3.996%
• 5yr yield 3.984% up from 3.448%
• 10yr yield 3.769% up from 3.468% 
• 30yr yield 3.857% up from 3.792%

Everything is inverted (shorter term maturities yield more than longer term maturities) except the 30 yr which is higher than the 10 yr.

The next chart covers the past 15 months showing the 30 year yield over the 5 year yield on top, The 1, 2, 5, 10 & 30 year treasury rates in the middle group and the SPX with a 50 day simple moving average on the bottom.

Conclusion

Profits are down and money supply is down.  This has to be a blow off top.

The strongest sectors last week were Transportation and Basic material while the weakest were Energy and Precious Metals (for the 5th week in a row).

I expect the major averages to be higher on Friday, June 23 than they were on Friday, June 16.

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