The good news is:

• Next week's Seasonality has been stronger than it's been recently.

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 to another 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.

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 are all negative.

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.  

Ditto OTC SI’s.

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 hit a new 6 month low every day last week.

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 every day last week. 

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 also finished the week slightly above its 6 month low. 

The Positives

The market is oversold so we could see another “dead cat bounce” with the help of modestly positive seasonality.

Seasonality

Next week includes the last 2 trading days of October and the first 3 days of November 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 1928 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 positive by all measures, but weaker during the 3rd year of the Presidential Cycle than other years. 

Report for the last 2 days of October and first 3 days of November.

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 3 (PY3)

               Day2      Day1      Day1      Day2      Day3      Totals

 1963-3      -0.64% 3  -0.81% 4   0.14% 5   0.06% 1  -0.93% 3    -2.19%

 1967-3      -0.24% 1   0.02% 2  -0.63% 3  -1.05% 4  -0.50% 5    -2.40%

 1971-3       0.21% 4   0.57% 5  -1.34% 1  -0.14% 2   1.42% 3     0.72%

 1975-3      -0.17% 4  -0.59% 5  -0.48% 1   0.31% 2   0.57% 3    -0.36%

 1979-3       1.17% 2   0.04% 3   0.66% 4   0.34% 5  -0.56% 1     1.64%


 Avg          0.07%    -0.15%    -0.33%    -0.10%     0.00%      -0.52%


 1983-3      -0.49% 5  -0.58% 1  -0.55% 2   0.78% 3  -0.12% 4    -0.95%

 1987-3       2.00% 4   2.00% 5   1.56% 1  -2.00% 2  -0.17% 3     3.39%

 1991-3       1.27% 3   0.31% 4  -0.38% 5  -0.63% 1   0.25% 2     0.81%

 1995-3       1.37% 1  -0.35% 2   0.42% 3   1.61% 4   0.79% 5     3.86%

 1999-3       2.00% 4   2.00% 5   0.04% 1   0.47% 2   1.58% 3     6.09%


 Avg          1.23%     0.68%     0.22%     0.05%     0.47%       2.64%


 2003-3      -0.20% 4  -0.02% 5   1.84% 1  -0.49% 2   0.07% 3     1.19%

 2007-3      -0.03% 2   1.51% 3  -2.00% 4   0.56% 5  -0.54% 1    -0.50%

 2011-3      -0.05% 5  -1.93% 1  -2.00% 2   1.27% 3   2.00% 4    -0.71%

 2015-3      -0.42% 4  -0.40% 5   1.45% 1   0.35% 2  -0.05% 3     0.93%

 2019-3       0.33% 3  -0.14% 4   1.13% 5   0.56% 1   0.02% 2     1.90%


 Avg         -0.07%    -0.20%     0.08%     0.45%     0.30%       0.56%


OTC summary for PY3 1963 - 2019

Averages      0.41%     0.11%    -0.01%     0.13%     0.26%       0.89%

% Winners       47%       47%       53%       67%       53%         60%

MDD  11/1/2011  3.94% --  11/3/1967  2.38% --  11/6/1963  2.17%


OTC summary for all years 1963 - 2022

Averages      0.27%     0.25%     0.24%     0.15%     0.27%       1.19%

% Winners       57%       63%       65%       53%       65%         75%

MDD 11/3/2022  5.53% --  11/5/1973  4.43% --  11/1/2011  3.94%


SPX PY3

               Day2      Day1      Day1      Day2      Day3      Totals

 1931-3       2.00% 5   0.96% 6  -0.28% 1   2.00% 3  -0.37% 4     4.30%

 1935-3      -0.72% 3   0.81% 4   1.20% 5  -0.24% 6   0.32% 1     1.37%

 1939-3      -0.15% 1  -1.00% 2  -0.08% 3   0.16% 4   0.86% 5    -0.22%


 1943-3      -0.42% 5   0.08% 6   0.00% 1  -1.17% 3  -0.85% 4    -2.36%

 1947-3      -1.03% 4   0.65% 5   0.32% 6  -0.13% 1  -0.78% 3    -0.96%

 1951-3      -0.13% 2   1.24% 3   0.70% 4  -0.74% 5  -0.83% 6     0.24%

 1955-3       0.55% 5  -0.07% 1  -0.14% 2   0.17% 3   2.00% 4     2.50%

 1959-3      -0.09% 4   0.19% 5  -0.19% 1  -0.26% 3   0.10% 4    -0.24%


 Avg         -0.22%     0.42%     0.14%    -0.43%    -0.07%      -0.17%


 1963-3      -0.89% 3   0.28% 4  -0.24% 5  -0.51% 1  -0.87% 3    -2.23%

 1967-3      -0.18% 1  -0.94% 2  -1.27% 3  -0.40% 4  -0.61% 5    -3.39%

 1971-3       0.18% 4   0.29% 5  -1.52% 1   0.41% 2   1.86% 3     1.22%

 1975-3      -0.09% 4  -0.30% 5  -1.07% 1   0.48% 2   0.72% 3    -0.26%

 1979-3       1.95% 2  -0.83% 3   0.74% 4  -0.06% 5  -0.67% 1     1.12%


 Avg          0.19%    -0.30%    -0.67%    -0.02%     0.09%      -0.71%


 1983-3      -0.89% 5   0.11% 1   0.06% 2   0.73% 3  -0.84% 4    -0.84%

 1987-3       2.00% 4   2.00% 5   1.57% 1  -1.93% 2  -0.74% 3     2.90%

 1991-3       0.38% 3  -0.13% 4  -0.29% 5  -0.27% 1  -0.40% 2    -0.71%

 1995-3       0.61% 1  -0.30% 2   0.47% 3   0.94% 4   0.14% 5     1.87%

 1999-3       2.00% 4   1.53% 5  -0.65% 1  -0.47% 2   0.53% 3     2.94%


 Avg          0.82%     0.64%     0.23%    -0.20%    -0.26%       1.23%


 2003-3      -0.11% 4   0.36% 5   0.79% 1  -0.54% 2  -0.14% 3     0.36%

 2007-3      -0.65% 2   1.20% 3  -2.00% 4   0.08% 5  -0.50% 1    -1.86%

 2011-3       0.04% 5  -2.00% 1  -2.00% 2   1.61% 3   1.88% 4    -0.47%

 2015-3      -0.04% 4  -0.48% 5   1.19% 1   0.27% 2  -0.35% 3     0.58%

 2019-3       0.33% 3  -0.30% 4   0.97% 5   0.37% 1  -0.12% 2     1.24%


 Avg         -0.09%    -0.24%    -0.21%     0.36%     0.15%      -0.03%


SPX summary for PY3 1931 - 2019

Averages      0.20%     0.15%    -0.08%     0.02%     0.02%       0.31%

% Winners       43%       57%       43%       48%       39%         52%

MDD  11/1/2011  3.96% --  11/3/1967  3.35% --  11/4/1987  2.65%


SPX summary for all years 1928 - 2022

Averages      0.25%     0.14%     0.27%     0.10%     0.25%       1.00%

% Winners       58%       56%       63%       57%       65%         72%

MDD 11/3/1932  6.30% --  11/5/1973  5.07% --  11/4/1937  4.46%

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 3rd year of the Presidential Cycle November has been up 60% time with an average gain of 1.0%.  The best November 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 black line shows the average during the 3rd 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 0.9%.  During the 3rd year of the Presidential Cycle the SPX has been up 52% of the time with an average loss (-0.6%).  The best November 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 daily average performance over all years for the SPX in November in red and the performance during the 3rd year of the Presidential Cycle in black.

Since 1979 the Russell 2000 (R2K) has been up 68% of the time in November with an average gain of 2.3%.  During the 3rd year of the Presidential Cycle the R2K has been up 64% of the time with an average gain of 1.4%.  The best November for the R2K 2020 (+18.3%), 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 3rd year of the Presidential Cycle in black.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 61% of the time in November with an average gain of 1.0%.  During the 3rd year of the Presidential Cycle the DJIA has been up 50% of the time in November with an average loss of -0.1%.  The best November for the DJIA, 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 grey and the performance during the 3rd year of the Presidential Cycle in black.

Conclusion

Everything is at oversold extremes.  A relief rally might be helped by modestly positive Seasonality.

The strongest sectors last week were Precious Metals (for the 2nd week) and Utilities while the weakest were (same as last week) Electronics and Transportation.

I expect the major averages to be lower on Friday November 2 than they were on Friday October 27. 

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