Technical Market Report For October 7, 2023
The good news is:
- The market is oversold.
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 is continuing to decline hitting a new 6 month low.
(Click on image to enlarge)
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.
OTC NH fell to another new low for the past 6 months.
(Click on image to enlarge)
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 are all near their lows.
(Click on image to enlarge)
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.
Only the AD SI has failed to turn upward.
(Click on image to enlarge)
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 moved upward Wednesday and Thursday, but turned down Friday.
(Click on image to enlarge)
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.
(Click on image to enlarge)
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 is extremely negative.
(Click on image to enlarge)
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 also at an extremely negative level
(Click on image to enlarge).
The Positives
The market is oversold and might bounce (dead cat).
Seasonality
Next week includes the 5 trading days prior to the 2nd 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 modestly positive by all measures.
OTC Presidential Year 3 (PY3)
Year Mon Tue Wed Thur Fri Totals
1963-3 -0.26% -0.17% 0.20% -0.58% 0.09% -0.72%
1967-3 0.49% 0.36% -0.51% -0.41% -0.39% -0.45%
1971-3 0.35% 0.03% 0.63% 0.27% -0.22% 1.06%
1975-3 0.70% -0.20% 0.96% 0.34% 0.12% 1.92%
1979-3 -0.86% -2.00% -2.00% 0.56% 0.44% -3.86%
Avg 0.08% -0.40% -0.14% 0.04% 0.01% -0.41%
1983-3 0.02% -0.68% -1.29% -0.39% -0.14% -2.48%
1987-3 0.45% -1.35% -0.64% -1.04% -0.36% -2.94%
1991-3 -0.81% 0.20% -0.67% 0.41% 0.60% -0.25%
1995-3 -2.00% -0.13% 1.84% 1.40% 0.28% 1.39%
1999-3 2.00% 0.13% 2.00% 0.12% 0.91% 5.16%
Avg -0.07% -0.36% 0.25% 0.10% 0.26% 0.17%
2003-3 0.69% 0.76% -0.74% 0.96% 0.18% 1.84%
2007-3 0.25% 0.59% 0.27% -1.40% 1.21% 0.93%
2011-3 2.00% 0.66% 0.84% 0.60% 1.82% 5.91%
2015-3 1.56% -0.69% 0.90% 0.41% 0.41% 2.59%
2019-3 -0.33% -1.67% 1.02% 0.60% 1.34% 0.96%
Avg 0.83% -0.07% 0.46% 0.23% 0.99% 2.45%
OTC summary for PY3 1963 - 2019
Avg 0.28% -0.28% 0.19% 0.12% 0.42% 0.74%
Win% 67% 47% 60% 67% 73% 60%
OTC summary for all years 1963 - 2022
Avg 0.01% -0.26% 0.00% 0.21% 0.32% 0.27%
Win% 55% 45% 51% 68% 70% 57%
SPX PY3
Year Mon Tue Wed Thur Fri Totals
1955-3 -2.00% -0.85% 1.76% -0.31% -0.41% -1.81%
1959-3 -0.10% -0.09% -0.26% -0.23% 0.33% -0.35%
1963-3 -0.21% -0.14% -0.58% 0.03% 0.10% -0.80%
1967-3 0.26% -0.69% -0.49% -0.64% 0.26% -1.30%
1971-3 0.28% -0.10% 0.72% 0.20% -0.66% 0.44%
1975-3 1.08% -0.13% 1.35% 0.49% -0.18% 2.61%
1979-3 -1.25% -2.00% -1.25% -0.24% -0.53% -5.27%
Avg 0.03% -0.61% -0.05% -0.03% -0.20% -0.86%
1983-3 1.08% -1.34% -0.42% 0.15% -0.01% -0.54%
1987-3 0.00% -2.00% -0.21% -1.38% -0.98% -4.57%
1991-3 -0.46% 0.31% -1.02% 1.00% 0.24% 0.07%
1995-3 -0.71% -0.15% 0.33% 0.37% 0.49% 0.35%
1999-3 1.70% -0.25% 1.84% -0.58% 1.39% 4.11%
Avg 0.32% -0.68% 0.11% -0.09% 0.22% -0.12%
2003-3 0.44% 0.47% -0.53% 0.48% -0.06% 0.80%
2007-3 -0.32% 0.81% -0.17% -0.52% 0.48% 0.28%
2011-3 2.00% 0.05% 0.98% -0.30% 1.74% 4.47%
2015-3 1.83% -0.36% 0.80% 0.88% 0.07% 3.23%
2019-3 -0.45% -1.56% 0.91% 0.64% 1.09% 0.64%
Avg 0.70% -0.12% 0.40% 0.24% 0.66% 1.88%
SPX summary for PY3 1955 - 2019
Avg 0.19% -0.47% 0.22% 0.00% 0.20% 0.14%
Win% 53% 24% 47% 53% 59% 59%
OTC summary for all years 1953 - 2022
Avg 0.08% -0.21% 0.08% 0.01% 0.16% 0.13%
Win% 52% 35% 51% 46% 57% 57%
Conclusion
The strong early October seasonality was a bust.
There was hope late mid week, but that disintegrated on Friday when new lows returned with a vengeance.
The strongest sectors last week were Technology and Electronics while the weakest were Utilities and Energy.
I expect the major averages to be lower on Friday October 13 than they were on Friday October 6.
Last week the DJIA and Russell 2000 were down while the OTC and SPX were up so I am calling last weeks positive forecast a tie.
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