Technical Market Report For November 26, 2022

  • The market has been doing a good job of following the seasonal pattern for late in the 2nd year of the Presidential Cycle.  

The Negatives

Nasdaq new lows outnumbered new highs every day last week.

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 remained in negative territory. 


The Positives

New lows were in mid double digits all week 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 finished its third week in positive territory.

 

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 continued its upward move last week.  It will take more than 227 new lows to turn the indicator downward.

 

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

NY NL also continued moving upward.  It will require more than 100 NYSE new lows to turn this indicator downward.

 

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 rose last week and remains near 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 ditto.

 

Seasonality

Next week includes the last 3 trading days of November and the first 2 trading days of December 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 1928 to 2021.  There are summaries for both the 2nd 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 3 days of November and the first 2 days of December.

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 2 (PY2)

               Day3      Day2      Day1      Day1      Day2      Totals

 1966-2       0.26% 1   0.86% 2  -0.24% 3  -0.07% 4  -0.15% 5     0.66%

 1970-2       0.31% 3   0.25% 5   1.34% 1   1.54% 2   0.24% 3     3.69%

 1974-2       1.57% 2   0.24% 3   0.24% 5  -2.05% 1  -1.88% 2    -1.88%

 1978-2      -0.32% 2  -1.31% 3   0.53% 4   1.31% 5   0.33% 1     0.54%


 1982-2       0.78% 5  -0.11% 1   1.72% 2   1.41% 3   0.25% 4     4.05%

 1986-2       0.24% 2   0.34% 3   0.40% 5  -0.47% 1   0.79% 2     1.29%

 1990-2       0.29% 3   0.19% 4   0.93% 5   0.63% 1   0.77% 2     2.81%

 1994-2       0.43% 1   0.77% 2  -0.15% 3  -1.35% 4   0.65% 5     0.35%

 1998-2       0.88% 3   1.65% 5  -3.31% 1   2.78% 2  -0.43% 3     1.57%


 Avg          0.52%     0.57%    -0.08%     0.60%     0.41%       2.01%


 2002-2      -2.53% 2   3.01% 3  -0.62% 5   0.41% 1  -2.41% 2    -2.14%

 2006-2       0.28% 2   0.81% 3  -0.02% 4  -0.76% 5   1.46% 1     1.77%

 2010-2      -0.34% 5  -0.37% 1  -1.07% 2   2.05% 3   1.17% 4     1.45%

 2014-2       0.07% 2   0.61% 3   0.09% 5  -1.34% 1   0.60% 2     0.03%

 2018-2       2.95% 3  -0.25% 4   0.79% 5   1.51% 1  -3.80% 2     1.20%


 Avg          0.09%     0.76%    -0.16%     0.37%    -0.60%       0.46%


OTC summary for PY2 1966 - 2018

Averages      0.35%     0.48%     0.04%     0.40%    -0.17%       1.10%

% Winners       79%       71%       57%       57%       64%         86%

MDD  12/3/1974  3.89% --  12/4/2018  3.80% --  11/30/1998  3.31%


OTC summary for all years 1963 - 2021

Averages      0.15%     0.38%    -0.04%     0.12%     0.09%       0.70%

% Winners       67%       69%       61%       59%       59%         71%

MDD 11/30/2000  9.81% --  12/1/2008  8.95% --  11/30/1987  3.97%


SPX PY2

               Day3      Day2      Day1      Day1      Day2      Totals

 1930-2      -1.42% 3  -1.38% 5   1.16% 6   1.39% 1   0.95% 2     0.69%

 1934-2      -0.95% 2   1.17% 3   0.00% 5  -0.10% 6  -1.26% 1    -1.14%

 1938-2      -2.14% 1   0.49% 2   2.41% 3  -0.94% 4  -1.03% 5    -1.21%


 1942-2       0.32% 5   0.00% 6  -0.54% 1  -0.11% 2   0.32% 3     0.00%

 1946-2       0.69% 3   0.89% 5  -0.07% 6  -1.57% 1   0.35% 2     0.30%

 1950-2      -3.07% 2  -0.97% 3   0.72% 4   0.77% 5  -0.61% 6    -3.16%

 1954-2       0.96% 5  -0.03% 1  -0.87% 2  -0.73% 3   0.56% 4    -0.10%

 1958-2      -0.60% 2   1.72% 3   1.12% 5   0.40% 1  -0.44% 2     2.20%


 Avg         -0.34%     0.32%     0.07%    -0.25%     0.04%      -0.15%


 1962-2       0.63% 3   0.47% 4  -0.24% 5  -0.51% 1   1.13% 2     1.47%

 1966-2      -0.17% 1  -0.36% 2   0.04% 3  -0.46% 4   0.06% 5    -0.89%

 1970-2       0.37% 3   0.99% 5   1.48% 1   0.31% 2   1.15% 3     4.30%

 1974-2       0.93% 2   0.68% 3   0.04% 5  -2.66% 1  -1.38% 2    -2.39%

 1978-2      -0.88% 2  -1.47% 3   1.01% 4   1.67% 5  -0.14% 1     0.20%


 Avg          0.18%     0.06%     0.47%    -0.33%     0.17%       0.54%


 1982-2       0.75% 5  -0.50% 1   3.23% 2   0.13% 3   0.07% 4     3.68%

 1986-2       0.29% 2   0.24% 3   0.18% 5  -0.07% 1   1.99% 2     2.63%

 1990-2      -0.05% 3  -0.48% 4   1.83% 5   0.58% 1   0.69% 2     2.58%

 1994-2       0.41% 1   0.22% 2  -0.33% 3  -1.05% 4   0.98% 5     0.23%

 1998-2       0.33% 3   0.45% 5  -2.41% 1   1.01% 2  -0.35% 3    -0.97%


 Avg          0.35%    -0.01%     0.50%     0.12%     0.68%       1.63%

 

 2002-2      -2.10% 2   2.80% 3  -0.27% 5  -0.19% 1  -1.47% 2    -1.24%

 2006-2       0.35% 2   0.92% 3   0.08% 4  -0.28% 5   0.89% 1     1.96%

 2010-2      -0.75% 5  -0.14% 1  -0.61% 2   2.16% 3   1.28% 4     1.95%

 2014-2      -0.12% 2   0.28% 3  -0.25% 5  -0.68% 1   0.64% 2    -0.13%

 2018-2       2.30% 3  -0.22% 4   0.82% 5   1.09% 1  -3.24% 2     0.75%
 Avg         -0.06%     0.73%    -0.05%     0.42%    -0.38%       0.66%


SPX summary for PY2 1930 - 2018

Averages     -0.17%     0.25%     0.37%     0.01%     0.05%       0.51%
% Winners       52%       57%       57%       43%       61%         61%

MDD  11/29/1950  4.01% --  12/3/1974  4.00% --  12/4/2018  3.24%


SPX summary for all years 1928 - 2021

Averages      0.03%     0.06%     0.16%    -0.02%     0.10%       0.33%

% Winners       52%       57%       54%       49%       55%         59%

MDD 12/1/2008  8.93% --  11/30/1987  6.53% --  12/2/1931  5.04%

 

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.

 

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

  • 2yr yield 4.795% up from 4.511%
  • 5yr yield 3.872% down from 4.268%
  • 10yr yield 3.688% down from 4.024% 
  • 30yr yield 3.741% up from 3.997%

Everything is inverted (shorter term maturities yield more than longer term maturities) except the 30 year to the 10 year.

The next chart covers the past 3 years 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.

 

December

Since 1963, over all years, the OTC in December has been up 63% of the time with an average gain of 1.7%.  During the 2nd year of the Presidential Cycle December has been up 57% time with an average gain of 0.4% The best December ever for the OTC was 1999 (+22.0%), the worst 2002 (-9.7%).

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 December over all years since 1963 while the grey line shows the average during the 2nd year of the Presidential Cycle over the same period.

 

Since 1928 the SPX has been up 73% of the time in December with an average gain of 1.4%.  During the 2nd year of the Presidential Cycle the SPX has been up 65% of the time with an average gain of 1.2%.  The best December ever for the SPX was 1991 (+11.2%) the worst 1931 (-14.5%).

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in December in red and the performance during the 2nd year of the Presidential Cycle in grey.

 

Since 1979 the Russell 2000 (R2K) has been up 77% of the time in December with an average gain of 2.3%.  During the 2nd year of the Presidential Cycle the R2K has been up 70% of the time in December with an average gain of 0.3%.  The best December ever for the R2K, 1999 (+11.2%), the worst 2002 (-5.7%).

The chart below is similar to those above except it shows the daily performance over all years of the R2K in December in magenta and the performance during the 2nd year of the Presidential Cycle in grey.

 

Since 1885 the DJIA has been up 70% of the time in December with an average gain of 1.2%.  During the 2nd year of the Presidential Cycle the DJIA has been up 68% of the time in December with an average gain of 1.0%.  The best December ever for the DJIA, 1903 (+10.8%), the worst 1931 (-17.0%).

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in December in Black and the performance during the 2nd year of the Presidential Cycle in grey.


Conclusion

The typical seasonal pattern for the 2nd year of the Presidential Cycle has been for prices to move up sharply from a late September / early October bottom.  In addition to rising prices there is a sharp reduction in the number of new lows.  My problem for the past 6 weeks has been there was no sharp reduction of new lows, it has been gradual.  There has been no clearly defined cycle bottom.

The strongest sectors last week were Precious metals (for the 3rd week in a row) and Utilities while the weakest were Internet and Energy (for the 3rd week in a row).

I expect the major averages to be higher on Friday, December 2, than they were on Friday, November 25.

Last week's negative forecast was a miss.


More By This Author:

Technical Market Report For November 19, 2022
Technical Market Report For November 12, 2022
Technical Market Report For November 5, 2022

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