Technical Market Report For May 27, 2023
The good news is:
- The Nasdaq composite (OTC) & S&P 500 (SPX) closed at their highs for this year last Friday (Thank you NVDA).
The Negatives
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 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 last week as the index moved to new highs.
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 back into negative 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 leveled off and remains at a dangerously high number.
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 bounced around last week, but remained at an uncomfortably high level.
The next chart covers the last 6 months showing the OTC in blue and a 10% trend (19 day EMA) of Nasdaq new highs (OTC NH) in brown.
OTC NH is a long way from confirming the new OTC high.
The next chart is similar to the one above except it shows the SPX in red and NY NH, in green, has been calculated with NYSE data.
NY NH fell as the SPX moved to a new high.
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 all turned downward last week.
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 the momentum indicators of Nasdaq SI’s turned downward at the end of last week.
The Positives
Big tech continued to be all that is pushing up the OTC and SPX.
Seasonality
Next week includes the last 2 trading days of May and the first 2 trading days 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 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.
Report for the last 2 days of May and first 2 days of June.
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)
Day2 Day1 Day1 Day2 Totals
1963-3 0.09% 3 1.05% 5 0.03% 1 -0.24% 2 0.93%
1967-3 -0.16% 1 -0.63% 3 -1.76% 4 0.22% 5 -2.32%
1971-3 0.07% 4 0.60% 5 0.57% 2 0.63% 3 1.88%
1975-3 -0.24% 4 1.61% 5 0.00% 1 0.94% 2 2.31%
1979-3 -0.81% 3 0.02% 4 0.26% 5 0.14% 1 -0.38%
Avg -0.21% 0.53% -0.18% 0.34% 0.48%
1983-3 0.21% 5 -1.06% 2 -0.25% 3 0.81% 4 -0.29%
1987-3 0.43% 4 0.53% 5 -0.37% 1 -0.34% 2 0.25%
1991-3 0.83% 4 0.58% 5 0.20% 1 0.03% 2 1.64%
1995-3 -1.51% 2 0.68% 3 0.49% 4 0.48% 5 0.14%
1999-3 -0.20% 4 2.12% 5 -2.35% 2 0.82% 3 0.40%
Avg -0.05% 0.57% -0.46% 0.36% 0.43%
2003-3 0.75% 4 1.33% 5 -0.32% 1 0.81% 2 2.56%
2007-3 0.80% 3 0.46% 4 0.36% 5 0.17% 1 1.79%
2011-3 0.50% 5 1.37% 2 -2.33% 3 0.15% 4 -0.31%
2015-3 -0.17% 4 -0.55% 5 0.25% 1 -0.13% 2 -0.59%
2019-3 0.27% 4 -1.51% 5 -1.61% 1 2.65% 2 -0.21%
Avg 0.43% 0.22% -0.73% 0.73% 0.65%
OTC summary for PY3 1963 - 2019
Averages 0.06% 0.44% -0.46% 0.48% 0.52%
% Winners 60% 73% 47% 80% 60%
MDD 6/3/2019 3.10% -- 6/1/1967 2.53% -- 6/1/1999 2.35%
OTC summary for all years 1963 - 2022
Averages 0.30% 0.19% 0.14% 0.44% 1.07%
% Winners 58% 63% 58% 72% 65%
MDD 6/1/2012 4.30% -- 6/3/2002 4.25% -- 5/30/2001 4.18%
SPX PY3
Day2 Day1 Day1 Day2 Totals
1931-3 0.38% 4 -2.18% 5 -4.76% 1 -1.61% 2 -8.18%
1935-3 -1.62% 3 -1.14% 5 -0.73% 6 1.68% 1 -1.81%
1939-3 0.78% 1 -0.43% 3 -1.55% 4 0.53% 5 -0.68%
1943-3 0.25% 5 0.50% 6 0.58% 2 0.08% 3 1.41%
1947-3 1.56% 3 0.77% 4 -1.04% 1 1.40% 2 2.69%
1951-3 0.66% 2 0.80% 4 -0.19% 5 -1.12% 1 0.15%
1955-3 0.21% 5 -0.05% 2 0.13% 3 0.34% 4 0.63%
1959-3 0.34% 4 0.50% 5 -0.09% 1 -0.68% 2 0.07%
Avg 0.60% 0.50% -0.12% 0.00% 0.99%
1963-3 0.46% 3 0.67% 5 -0.16% 1 0.01% 2 0.98%
1967-3 -0.54% 1 -1.56% 3 1.29% 4 -0.49% 5 -1.29%
1971-3 -0.19% 4 0.23% 5 0.57% 2 0.76% 3 1.37%
1975-3 -0.03% 4 1.64% 5 1.57% 1 0.33% 2 3.51%
1979-3 -0.94% 3 -0.03% 4 0.09% 5 0.15% 1 -0.73%
Avg -0.25% 0.19% 0.67% 0.15% 0.77%
1983-3 -0.62% 5 -1.26% 2 0.10% 3 0.88% 4 -0.90%
1987-3 0.70% 4 -0.23% 5 -0.09% 1 -0.47% 2 -0.09%
1991-3 1.09% 4 0.74% 5 -0.45% 1 -0.08% 2 1.29%
1995-3 -0.01% 2 1.88% 3 0.02% 4 -0.18% 5 1.70%
1999-3 -1.79% 4 1.59% 5 -0.58% 2 0.04% 3 -0.74%
Avg -0.13% 0.54% -0.20% 0.04% 0.25%
2003-3 -0.38% 4 1.47% 5 0.35% 1 0.47% 2 1.92%
2007-3 0.80% 3 0.03% 4 0.37% 5 0.18% 1 1.38%
2011-3 0.41% 5 1.06% 2 -2.28% 3 -0.12% 4 -0.93%
2015-3 -0.13% 4 -0.63% 5 0.21% 1 -0.10% 2 -0.65%
2019-3 0.21% 4 -1.32% 5 -0.28% 1 2.14% 2 0.76%
Avg 0.18% 0.12% -0.32% 0.52% 0.49%
SPX summary for PY3 1931 - 2019
Averages 0.07% 0.13% -0.30% 0.18% 0.08%
% Winners 57% 57% 48% 61% 57%
MDD 6/2/1931 8.34% -- 6/1/1935 3.45% -- 6/2/2011 2.40%
SPX summary for all years 1928 - 2022
Averages 0.25% 0.00% -0.01% 0.25% 0.47%
% Winners 62% 55% 52% 63% 60%
MDD 6/1/1932 9.28% -- 6/2/1931 8.34% -- 6/2/1934 4.88%
June
Since 1963, over all years the OTC in June has been up 57% of the time with an average gain of 0.5%. During the 3rd year of the Presidential Cycle June has been up 67% time with an average gain of 2.3%. The worst June ever, 2002 (-9.4%), the best 2000 (+16.6%)
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 June 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 57% of the time in June with an average gain of 0.7%. During the 3rd year of the Presidential Cycle the SPX has been up 65% of the time with an average gain of 2.1%. The best ever June for the SPX was 1938 (+24.7%) the worst 1930 (-16.5%).
The chart below is similar to the one above except it shows the daily performance over all years for the SPX in June in red and the performance during the 3rd year of the Presidential Cycle in black.
Since 1979 the Russell 2000 (R2K) has been up 64% of the time in June with an average gain of 0.6%. During the 3rd year of the Presidential Cycle the R2K has been up 73% of the time with an average gain of 1.8%. The best ever June for the R2K, 2000 (+8.6%), the worst 2022 (-8.4%)
The chart below is similar to those above except it shows the daily performance over all years of the R2K in June 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 46% of the time in June with an average gain of 0.1%. During the 3rd year of the Presidential Cycle the DJIA has been up 56% of the time with an average gain of 1.1%. The best June ever for the DJIA 1938 (+24.3%), the worst 1930 (-17.7%)
The chart below is similar to those above except it shows the daily performance over all years of the DJIA in June in Grey and the performance during the 3rd year of the Presidential Cycle in black.
Conclusion
This still looks like a blow off.
The strongest sectors last week were Technology and Banks while the weakest were Utilities and Precious Metals; both the same as last week.
I expect the major averages to be lower on Friday June 2 than they were on Friday May 26.
Last week the Dow Jones Industrial Average and the Russell 2000 were down while the OTC and SPX were up; so I am calling last week's negative forecast a tie.
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