The good news is:

• The market had a good week; most of the major indices were up around 5% for the week.

The Negatives

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 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 rose early in the week, but fell on Friday the strongest day of the week for prices. 

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 rose early in the week and fell on Friday the strongest day of the week for prices.  

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 rose last week.  The problem is the numbers are huge (crash worthy). 

The Positives

New highs increased a little on both the NYSE and Nasdaq last week.  The numbers were small, but going in the right direction.

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. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH continued moving upward last week.

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 also rose last week.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of October 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 mixed; stronger during the 2nd year of the Presidential Cycle than other years.  

Report for the week before the 4th Friday of Oct

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

Daily returns from Monday through the 4th Friday.

OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2  -0.33%   0.27%   0.45%   0.82%   1.33%   2.53%

 1970-2  -0.20%  -1.41%   0.41%  -0.42%  -0.48%  -2.10%

 1974-2   1.71%   0.50%  -1.15%  -1.26%   0.45%   0.24%

 1978-2  -1.52%  -0.66%   0.02%  -2.61%  -2.33%  -7.10%


 1982-2   1.05%   0.42%   1.55%   1.70%  -0.13%   4.59%

 1986-2  -0.62%  -0.12%   0.23%   0.64%   0.13%   0.27%

 1990-2   1.11%  -0.01%  -0.03%  -0.36%  -1.58%  -0.87%

 1994-2  -0.54%  -0.39%   0.66%   0.55%   1.13%   1.41%

 1998-2   1.71%  -0.58%   2.17%   1.66%  -0.51%   4.45%


 Avg      0.54%  -0.13%   0.92%   0.84%  -0.19%   1.97%


 2002-2   1.69%  -1.29%   2.12%  -1.63%   2.50%   3.39%

 2006-2   0.57%  -0.46%   0.50%   0.96%  -1.20%   0.37%

 2010-2   0.48%  -1.76%   0.84%   0.09%   0.80%   0.45%

 2014-2   1.35%   2.40%  -0.83%   1.60%   0.69%   5.21%

 2018-2   0.26%  -0.42%  -4.42%   2.95%  -2.06%  -3.69%


 Avg      0.87%  -0.31%  -0.36%   0.79%   0.15%   1.15%


OTC summary for PY2 1966 - 2018 

 Avg      0.48%  -0.25%   0.18%   0.33%  -0.09%   0.65%

 Win%       64%     29%     71%     64%     50%     71%


OTC summary for all years 1963 - 2021

 Avg      0.09%  -0.41%  -0.01%   0.06%  -0.05%  -0.32%

 Win%       54%     39%     50%     54%     54%     51%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2   0.38%   0.25%   0.81%  -0.12%   0.00%   1.32%

 1958-2  -0.37%   0.00%  -0.39%  -0.20%  -0.31%  -1.27%


 1962-2  -1.13%  -2.67%   3.22%  -0.94%  -0.27%  -1.81%

 1966-2   0.29%   0.61%   0.86%   0.82%   0.01%   2.60%

 1970-2  -1.34%   0.59%   0.02%  -0.33%   0.47%  -0.59%

 1974-2   1.69%  -0.50%  -2.87%  -1.14%  -0.14%  -2.97%

 1978-2   0.23%  -0.70%  -0.18%  -1.32%  -1.50%  -3.47%


 Avg     -0.05%  -0.54%   0.21%  -0.58%  -0.29%  -1.25%


 1982-2   2.37%  -0.11%   1.94%  -0.12%  -0.14%   3.94%

 1986-2  -1.20%  -0.04%   0.16%   1.28%  -0.43%  -0.23%

 1990-2   0.73%  -0.76%   0.08%  -0.78%  -1.76%  -2.49%

 1994-2  -0.87%   0.15%   0.24%   0.70%   1.70%   1.91%

 1998-2   0.57%   0.14%   0.56%   0.80%  -0.72%   1.35%


 Avg      0.32%  -0.12%   0.60%   0.38%  -0.27%   0.90%


 2002-2   1.73%  -1.06%   0.67%  -1.52%   1.72%   1.54%

 2006-2   0.62%   0.03%   0.35%   0.50%  -0.85%   0.64%

 2010-2   0.72%  -1.59%   1.05%   0.18%   0.24%   0.61%

 2014-2   0.91%   1.96%  -0.73%   1.23%   0.71%   4.08%

 2018-2  -0.43%  -0.55%  -3.09%   1.86%  -1.73%  -3.94%


 Avg      0.71%  -0.24%  -0.35%   0.45%   0.02%   0.59%


SPX summary for PY2 1954 - 2018 

 Avg      0.29%  -0.27%   0.16%   0.05%  -0.19%   0.07%

 Win%       65%     44%     71%     47%     38%     53%


SPX summary for all years 1954 - 2021

 Avg     -0.12%  -0.09%   0.10%  -0.07%  -0.03%  -0.21%

 Win%       58%     44%     54%     45%     49%     48%

Conclusion

Liquidity continues to be a problem worldwide. 

The market had a good week, but new lows remained at dangerous levels.

The strongest sectors last week were Basic Materials and Energy while the weakest were Retail and Biotech.

I expect the major averages to be lower on Friday, October 28 than they were on Friday, October 21.

Last week's negative forecast was a miss.

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