The good news is:

• Still too hard to find.

The Negatives

The first chart covers the last 6 months showing the S&P 500 (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 each month.

NY NH fell back to its 6 month low.

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

Ditto OTC NH

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them nearly binary, so direction is less important than position.

The next chart covers the past 6 months showing the SPX in red and 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 all turned downward.

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

OTC SI all are moving downward.

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 is at its 6 month low.

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.

Ditto NY NL.

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 hit a new 6 month low. 

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 is a little short of its 6 month low. 

The Positives

The market is oversold so we could see another “dead cat bounce”.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of October 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 mixed; weaker during the 3rd year of the Presidential Cycle than other years. 

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

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   0.49%  -0.06%  -0.14%   0.37%   0.60%   1.25%

 1967-3  -0.22%  -0.38%  -0.40%  -0.62%   0.62%  -0.99%

 1971-3  -0.49%  -0.98%  -1.31%   0.03%   0.18%  -2.57%

 1975-3   0.64%   0.38%   0.61%   0.19%  -0.56%   1.27%

 1979-3  -2.00%  -0.41%   0.31%  -0.22%   0.77%  -1.55%


 Avg     -0.32%  -0.29%  -0.18%  -0.05%   0.32%  -0.52%


 1983-3  -0.96%   0.65%  -0.27%  -0.13%  -0.49%  -1.20%

 1987-3  -2.00%  -2.00%   2.00%  -2.00%  -2.00%  -6.00%

 1991-3  -0.36%   0.03%  -0.37%  -1.20%  -0.68%  -2.58%

 1995-3  -0.25%   0.22%  -1.22%  -0.87%   0.79%  -1.33%

 1999-3  -1.56%  -0.03%   2.00%   0.49%   0.52%   1.42%


 Avg     -1.03%  -0.23%   0.43%  -0.74%  -0.37%  -1.94%


 2003-3   0.67%   0.82%  -2.00%  -0.66%  -1.06%  -2.23%

 2007-3   1.06%   1.65%  -0.88%  -0.86%   1.94%   2.90%

 2011-3   2.00%  -2.00%   0.46%   2.00%  -0.05%   2.41%

 2015-3   0.38%  -0.50%  -0.84%   1.65%   2.00%   2.70%

 2019-3   0.91%  -0.72%   0.19%   0.81%   0.70%   1.89%


 Avg      1.00%  -0.15%  -0.61%   0.59%   0.71%   1.54%


OTC summary for PY3 1963 - 2019 

 Avg     -0.11%  -0.22%  -0.12%  -0.07%   0.22%  -0.31%

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


OTC summary for all years 1963 - 2022

 Avg      0.24%  -0.22%  -0.02%   0.04%   0.00%   0.03%

 Win%       55%     40%     49%     53%     55%     52%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3   0.75%  -0.65%  -0.80%  -0.35%   0.55%  -0.51%

 1959-3  -0.56%  -0.61%  -0.19%  -0.97%   1.00%  -1.34%


 1963-3   0.08%  -0.57%   0.05%   0.38%   1.00%   0.94%

 1967-3  -0.44%  -0.57%   0.11%   0.44%   0.02%  -0.44%

 1971-3  -0.45%  -0.36%  -1.39%  -0.05%  -0.09%  -2.35%

 1975-3   1.08%   0.82%   0.17%   0.58%  -1.55%   1.11%

 1979-3  -0.88%  -0.43%   0.16%  -0.44%   0.57%  -1.01%


 Avg     -0.12%  -0.22%  -0.18%   0.18%  -0.01%  -0.35%


 1983-3   0.02%   0.29%  -0.65%  -0.33%  -0.89%  -1.56%

 1987-3  -2.00%   2.00%   2.00%  -2.00%  -0.01%  -0.01%

 1991-3  -0.63%  -0.56%   0.03%  -0.74%  -0.23%  -2.13%

 1995-3  -0.41%   0.26%  -0.70%  -0.99%   0.52%  -1.32%

 1999-3   0.55%   0.57%   2.00%  -0.46%   1.41%   4.06%


 Avg     -0.49%   0.51%   0.54%  -0.90%   0.16%  -0.19%


 2003-3   0.52%   0.13%  -1.50%   0.33%  -0.47%  -0.99%

 2007-3   0.38%   0.88%  -0.24%  -0.10%   1.38%   2.30%

 2011-3   1.29%  -2.00%   1.05%   2.00%   0.04%   2.38%

 2015-3   0.03%  -0.14%  -0.58%   1.66%   1.10%   2.07%

 2019-3   0.69%  -0.36%   0.28%   0.19%   0.41%   1.21%


 Avg      0.58%  -0.30%  -0.20%   0.82%   0.49%   1.39%


SPX summary for PY3 1955 - 2019

 Avg      0.00%  -0.08%  -0.01%  -0.05%   0.28%   0.14%

 Win%       59%     41%     53%     41%     65%     41%


SPX summary for all years 1953 - 2022

 Avg      0.13%  -0.09%   0.02%  -0.07%   0.02%   0.01%

 Win%       59%     45%     54%     44%     49%     47%

Conclusion

All of the breadth indicators are at or near their 6 month lows.

It will be interesting to see how long the Fed sticks with its higher-for-longer interest rate pledge.

The strongest sectors last week were Precious Metals and Energy while the weakest were Electronics and Transportation.

I expect the major averages to be lower on Friday, October 27, than they were on Friday, October 20. 

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