The good news is:

• The market had its best week in years.  

The Negatives

The new high / new low components of the Hindenburg Omen, a potential crash indicator developed by Jim Miekka, were met on Monday and Tuesday of last week.

The rally on Thursday and Friday was led by big tech, which has been the biggest loser in this bear market - What you would expect for a bear market rally.

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 1st 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 turned upward on Thursday and Friday.  However, new highs did not exceed new lows any day last week. 

The next chart covers the past 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 did not respond significantly to the sharp rally in the indices on Thursday and Friday.

The Positives

New highs did not increase as much as you would expect with the huge increase in index values, however new lows declined significantly on the NYSE.

The next chart is similar to the first one except it shows the S&P 500 (SPX) in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL ratio made it into positive territory when new highs outnumbered new lows by a considerable margin on Thursday and Friday.

The next chart is similar to the second chart above except it shows the SPX in red and NY NL in blue has been calculated with NYSE data.

NY NL moved sharply upward when new lows dropped into double digits.

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 green. 

OTC NH hit its highest high since early January.

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

NY NH is at its highest level in more than 6 months.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of November during the 2nd 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 2021 while SPX data runs from 1953 to 2021.  There are summaries for both the 2nd 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 positive by all measures. 

Report for the week before the 3rd Friday of November.

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

Daily returns from Monday through 3rd Friday.


OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2   0.18%  -0.35%   0.90%  -0.11%   0.75%   1.37%

 1970-2  -1.11%  -0.05%  -0.07%  -0.51%  -0.09%  -1.82%

 1974-2   0.32%  -2.04%  -0.58%   0.09%  -0.97%  -3.18%

 1978-2  -1.60%  -1.88%   0.51%   0.69%   1.32%  -0.96%


 1982-2  -1.41%  -1.91%   1.24%   0.67%   0.06%  -1.35%

 1986-2  -0.42%  -1.25%  -0.80%   0.68%   0.70%  -1.09%

 1990-2   2.78%   0.40%   1.13%  -0.68%  -1.02%   2.62%

 1994-2   0.79%   0.11%   0.08%  -0.49%  -0.15%   0.34%

 1998-2   0.74%   0.91%   1.00%   1.18%   0.44%   4.27%


 Avg      0.50%  -0.35%   0.53%   0.27%   0.01%   0.96%


 2002-2  -2.95%   2.30%   0.87%   3.69%  -0.03%   3.88%

 2006-2   0.70%   1.01%   0.50%   0.26%  -0.13%   2.33%

 2010-2  -0.17%  -1.75%   0.25%   1.55%   0.15%   0.02%

 2014-2  -0.37%   0.67%  -0.57%   0.56%   0.24%   0.53%

 2018-2  -2.78%   0.00%  -0.90%   1.72%  -0.15%  -2.11%


 Avg     -1.12%   0.56%   0.03%   1.55%   0.01%   0.93%


OTC summary for PY2 1966 - 2018 

 Avg     -0.38%  -0.29%   0.25%   0.66%   0.08%   0.35%

 Win%       43%     46%     64%     71%     50%     57%


OTC summary for all years 1963 - 2021

 Avg     -0.14%   0.12%  -0.10%   0.10%   0.05%   0.04%

 Win%       45%     55%     53%     58%     54%     59%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2  -0.21%   0.30%   0.18%  -0.56%   0.03%  -0.27%

 1958-2   0.28%  -0.21%   0.13%   0.02%  -0.96%  -0.73%


 1962-2   1.38%  -0.22%   1.18%  -0.32%   0.32%   2.34%

 1966-2  -0.70%   0.39%   0.83%  -0.69%  -0.66%  -0.82%

 1970-2  -0.16%   0.12%  -0.66%   0.14%   0.98%   0.43%

 1974-2   0.32%  -1.97%  -0.43%  -0.40%  -1.57%  -4.05%

 1978-2  -1.73%  -0.69%   0.24%   1.08%   0.76%  -0.34%


 Avg     -0.18%  -0.47%   0.23%  -0.04%  -0.04%  -0.49%


 1982-2  -1.79%  -1.17%   1.85%   0.30%  -0.95%  -1.77%

 1986-2  -0.53%  -2.64%   0.37%   1.85%   1.57%   0.62%

 1990-2   1.83%  -0.57%   0.86%  -1.05%   0.03%   1.10%

 1994-2   0.80%  -0.22%   0.13%  -0.44%  -0.45%  -0.19%

 1998-2   0.91%   0.30%   0.46%   0.71%   0.95%   3.32%


 Avg      0.24%  -0.86%   0.73%   0.27%   0.23%   0.62%


 2002-2  -2.07%   0.77%  -0.05%   2.46%   0.61%   1.73%

 2006-2   0.25%   0.64%   0.24%   0.23%   0.10%   1.46%

 2010-2  -0.12%  -1.62%   0.02%   1.54%   0.25%   0.07%

 2014-2   0.07%   0.51%  -0.15%   0.20%   0.52%   1.16%

 2018-2  -1.97%  -0.15%  -0.76%   1.06%   0.22%  -1.59%


 Avg     -0.77%   0.03%  -0.14%   1.10%   0.34%   0.56%


 SPX summary for PY2 1954 - 2018

 Avg     -0.20%  -0.38%   0.26%   0.36%   0.10%   0.14%

 Win%       47%     41%     71%     65%     71%     53%


SPX summary for all years 1953 - 2021

 Avg     -0.01%   0.01%  -0.06%  -0.02%   0.13%   0.04%

 Win%       47%     46%     58%     54%     60%     54%

Conclusion

Traders changed their minds on the idea of a Fed pivot Thursday and Friday last week.

The strongest sectors last week were Precious Metals and Transportation while the weakest were Telecomm and Energy (down from the top last week).

I expect the major averages to be lower on Friday, November 18 than they were on Friday, November 11.

Last week's negative forecast was a miss.

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