The good news is:

• Seasonality is positive for next week.  

The Negatives

The new high / new low components of the Hindenburg Omen, a potential crash indicator developed by Jim Miekka, were met several times 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 turned sharply downward last week.

The next chart is similar to the previous 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, ditto.

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new lows (NY NL), in blue.  NY NL has been plotted on an inverted Y axis so decreasing numbers of New Lows move the indicator upward (up is good).  

NY NL leveled off and the numbers remained in triple digits.

The next chart is similar to the previous one except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.

OTC NL ditto.

The Positives

New highs continued to increase on both the NYSE and Nasdaq early last week, but leveled off later in the week.

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 before leveling off.

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 continued moving upward last week.

Seasonality

Next week includes the 5 trading days prior to the 2nd 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 2nd Friday of November.

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

Daily returns from Monday to 2nd Friday.

OTC Presidental Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2   0.77%   0.00%   0.54%   0.65%   0.70%   2.66%

 1970-2   0.26%   0.96%   0.86%  -0.34%  -1.33%   0.41%

 1974-2  -0.68%   2.12%   0.18%   0.80%  -0.20%   2.23%

 1978-2  -0.36%  -1.96%   0.14%   0.79%   0.84%  -0.54%


 1982-2  -0.13%   1.52%   0.10%   0.48%   0.47%   2.44%

 1986-2  -0.28%   0.37%  -0.03%  -0.88%   0.16%  -0.66%

 1990-2   1.28%  -0.07%  -1.10%  -0.13%   1.66%   1.65%

 1994-2  -0.49%   0.69%  -0.04%  -0.37%  -0.30%  -0.51%

 1998-2   0.24%   0.24%  -0.19%  -0.59%  -0.17%  -0.46%


 Avg      0.12%   0.55%  -0.25%  -0.30%   0.37%   0.49%


 2002-2   2.63%   0.33%   1.27%  -2.98%  -1.27%  -0.01%

 2006-2   1.51%   0.42%   0.38%  -0.37%   0.58%   2.51%

 2010-2   0.04%  -0.66%   0.62%  -0.90%  -1.46%  -2.37%

 2014-2   0.41%   0.19%   0.31%   0.11%   0.18%   1.20%

 2018-2  -0.38%   0.64%   2.64%  -0.53%  -1.65%   0.73%


 Avg      0.84%   0.18%   1.04%  -0.94%  -0.72%   0.41%


OTC summary for PY2 1966 - 2018 

 Avg      0.35%   0.37%   0.41%  -0.31%  -0.13%   0.66%

 Win%       57%     77%     71%     36%     50%     57%


OTC summary for all years 1963 - 2021

 Avg      0.02%   0.10%  -0.12%   0.11%  -0.06%   0.04%

 Win%       51%     59%     54%     54%     62%     49%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2   0.95%   0.39%   0.09%   0.87%   0.21%   2.52%

 1958-2   0.59%   0.78%   0.13%  -0.41%   0.49%   1.58%


 1962-2   1.04%   0.00%   0.62%  -0.66%   0.79%   1.78%

 1966-2  -0.10%   0.00%   0.81%   0.63%   0.06%   1.39%

 1970-2   0.53%   0.14%   0.28%  -1.03%  -0.93%  -1.00%

 1974-2  -1.08%   2.78%  -0.48%   0.62%  -0.40%   1.43%

 1978-2  -1.03%  -1.41%   0.64%  -0.03%   0.37%  -1.46%


 Avg     -0.13%   0.50%   0.37%  -0.10%  -0.02%   0.43%


 1982-2  -1.21%   1.84%  -1.30%   0.43%  -1.57%  -1.82%

 1986-2   0.15%   0.39%  -0.18%  -1.47%   0.61%  -0.50%

 1990-2   0.88%  -0.94%  -1.80%   0.52%   1.99%   0.65%

 1994-2   0.17%   0.56%  -0.05%  -0.23%  -0.43%   0.02%

 1998-2  -0.95%  -0.17%  -0.65%  -0.25%   0.67%  -1.34%


 Avg     -0.19%   0.33%  -0.80%  -0.20%   0.25%  -0.60%


 2002-2   0.82%   0.78%   0.91%  -2.29%  -0.88%  -0.65%

 2006-2   1.13%   0.22%   0.21%  -0.53%   0.19%   1.22%

 2010-2  -0.21%  -0.81%   0.44%  -0.42%  -1.18%  -2.18%

 2014-2   0.31%   0.07%  -0.07%   0.05%   0.02%   0.39%

 2018-2   0.56%   0.63%   2.12%  -0.25%  -0.92%   2.14%


 Avg      0.52%   0.18%   0.72%  -0.69%  -0.55%   0.18%


SPX summary for PY2 1954 - 2018 

 Avg      0.15%   0.35%   0.10%  -0.26%  -0.05%   0.24%

 Win%       65%     73%     59%     35%     59%     59%


SPX summary for all years 1953 - 2021

 Avg      0.05%   0.10%  -0.04%   0.16%  -0.02%   0.23%

 Win%       57%     50%     59%     57%     57%     57%

November

Since 1963, over all years, the OTC in November has been up 73% of the time with an average gain of 1.8%.  During the 2nd year of the Presidential Cycle November has been up 71% time with an average gain of 3.5% The best November ever for the OTC was 2001 (+14.2%), the worst 2000 (-22.9%).

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 November 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 61% of the time in November with an average gain of 0.8%.  During the 2nd year of the Presidential Cycle the SPX has been up 65% of the time with an average gain of 2.0%.  The best November ever for the SPX was 1928 (+12.0%), the worst 1929 (-13.4%).

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

Since 1979 the Russell 2000 (R2K) has been up 67% of the time in November 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 November with an average gain of 3.3%.  The best November ever for the R2K was 2016 (+11.0%), the worst 2008 (-12.0%).

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

Since 1885 the DJIA has been up 60% of the time in November with an average gain of 1.0%.  During the 2nd year of the Presidential Cycle the DJIA has been up 67% of the time in November with an average gain of 1.3%.  The best November ever for the DJIA was 1928 (+16.3%), the worst 1973 (-14.0%).

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

Conclusion

Traders gave up on the idea of a Fed pivot for a few days last week.

The strongest sectors last week were Utilities (for the 2nd week in a row) and Energy (up from the bottom last week) while the weakest were Technology and Retail.

I expect the major averages to be lower on Friday, November 11 than they were on Friday, November 4.

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