The good news is:

• New lows on Friday, a down day, were lower than they were on Thursday an up day.

The Negatives

In addition to the on going bear market, Seasonality for the coming week is modestly negative.

* * *

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 has remained in negative territory for 5 months. 

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 is in deeply in negative territory,

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 hit a new low on Friday confirming the new index cyclical low.

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 fell sharply, but is not confirming the new index low.  This would be a positive if the numbers were not so large.

The Positives

The market is oversold and new lows declined from 521 on the NYSE Thursday (an up day) to 332 on Friday (a down day).

The pattern was similar on the Nasdaq; 831 on Thursday and 524 on Friday.

Seasonality

Next week includes the first 5 trading days May 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 1928 to 2021.  There are summaries for both the 2nd year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been mixed and weaker during the 2nd year of the Presidential Cycle than other years. 

Report for the first 5 days of May.

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 2 (PY2)

               Day1      Day2      Day3      Day4      Day5      Totals

 1966-2       0.51% 1  -0.11% 2  -1.06% 3  -0.23% 4  -2.20% 5    -3.11%

 1970-2      -0.29% 5   0.05% 1  -2.37% 2   0.26% 3   0.01% 4    -2.34%

 1974-2       0.89% 3   0.39% 4  -0.57% 5  -0.18% 1  -0.74% 2    -0.22%

 1978-2       0.68% 1   0.14% 2   0.08% 3   0.23% 4   0.68% 5     1.80%


 1982-2       0.15% 1   0.53% 2  -0.04% 3   0.75% 4   0.46% 5     1.85%

 1986-2      -0.41% 4   0.40% 5   0.74% 1   0.07% 2  -0.25% 3     0.55%

 1990-2       0.42% 2   0.41% 3   0.44% 4   0.75% 5   0.61% 1     2.63%

 1994-2       0.93% 1  -0.18% 2   0.13% 3   0.03% 4  -1.04% 5    -0.12%

 1998-2       0.27% 5   0.20% 1  -0.66% 2  -0.44% 3  -1.16% 4    -1.79%


 Avg          0.27%     0.27%     0.12%     0.23%    -0.28%       0.62%


 2002-2      -0.63% 3  -1.95% 4  -1.93% 5  -2.14% 1  -0.30% 2    -6.95%

 2006-2      -0.77% 1   0.22% 2  -0.25% 3   0.87% 4   0.80% 5     0.87%

 2010-2       1.53% 1  -2.98% 2  -0.91% 3  -3.44% 4  -2.33% 5    -8.13%

 2014-2       0.31% 4  -0.09% 5   0.34% 1  -1.38% 2  -0.32% 3    -1.13%

 2018-2       0.91% 2  -0.42% 3  -0.18% 4   1.71% 5   0.77% 1     2.80%


 Avg          0.27%    -1.04%    -0.59%    -0.88%    -0.27%      -2.51%


OTC summary for P2 1966 - 2018

Averages      0.32%    -0.24%    -0.45%    -0.22%    -0.36%      -0.95%

% Winners       71%       57%       36%       57%       43%         43%

MDD  5/7/2010  9.33% --  5/7/2002  6.78% --  5/6/1966  3.58%


OTC summary for all years 1963 - 2021

Averages      0.26%     0.12%     0.05%    -0.04%    -0.04%       0.35%

% Winners       62%       66%       57%       56%       58%         61%

MDD 5/7/2010  9.33% --  5/7/2002  6.78% --  5/3/2000  6.34%


SPX PY2

               Day1      Day2      Day3      Day4      Day5      Totals

 1930-2      -2.41% 4  -3.00% 5  -3.10% 6   0.61% 1   3.39% 2    -4.50%

 1934-2       0.00% 2  -2.01% 3   0.39% 4   0.29% 5  -1.55% 6    -2.88%

 1938-2      -1.13% 1   2.71% 2   1.62% 3  -0.40% 4   4.61% 5     7.42%


 1942-2       0.65% 5   0.52% 6   0.26% 1   0.39% 2  -0.13% 3     1.69%

 1946-2      -0.27% 3  -0.48% 4  -0.86% 5  -0.27% 6  -0.81% 1    -2.69%

 1950-2       0.83% 1  -0.60% 2   0.88% 3  -0.82% 4   0.55% 5     0.84%

 1954-2      -0.18% 1   0.25% 2   0.04% 3   0.78% 4   0.49% 5     1.38%

 1958-2       0.23% 4   0.34% 5   0.23% 1   0.50% 2  -0.18% 3     1.12%


 Avg          0.25%     0.01%     0.11%     0.11%    -0.02%       0.47%


 1962-2       0.71% 2   0.44% 3   0.82% 4  -0.44% 5  -0.33% 1     1.20%

 1966-2      -0.18% 1  -1.16% 2  -0.51% 3  -1.63% 4  -0.10% 5    -3.58%

 1970-2      -0.10% 5  -2.54% 1  -0.97% 2   1.11% 3   0.45% 4    -2.05%

 1974-2       2.11% 3  -0.14% 4  -0.87% 5  -0.19% 1   0.37% 2     1.29%

 1978-2       0.87% 1  -0.43% 2  -1.02% 3  -0.34% 4   0.63% 5    -0.30%


 Avg          0.68%    -0.77%    -0.51%    -0.30%     0.20%      -0.69%


 1982-2       0.32% 1   0.56% 2   0.18% 3   0.86% 4   0.67% 5     2.58%

 1986-2      -0.15% 4  -0.16% 5   1.25% 1  -0.21% 2  -0.49% 3     0.25%

 1990-2       0.44% 2   0.67% 3   0.33% 4   0.84% 5   0.63% 1     2.91%

 1994-2       0.47% 1   0.00% 2  -0.29% 3  -0.08% 4  -0.79% 5    -0.68%

 1998-2       0.83% 5   0.10% 1  -0.58% 2  -0.96% 3  -0.89% 4    -1.50%


 Avg          0.38%     0.23%     0.18%     0.09%    -0.17%       0.71%


 2002-2       0.89% 3  -0.17% 4  -1.03% 5  -1.93% 1  -0.30% 2    -2.55%

 2006-2      -0.41% 1   0.61% 2  -0.41% 3   0.34% 4   1.03% 5     1.16%

 2010-2       1.31% 1  -2.38% 2  -0.66% 3  -3.24% 4  -1.53% 5    -6.50%

 2014-2      -0.01% 4  -0.13% 5   0.19% 1  -0.90% 2   0.56% 3    -0.30%

 2018-2       0.25% 2  -0.72% 3  -0.23% 4   1.28% 5   0.35% 1     0.94%


 Avg          0.40%    -0.56%    -0.43%    -0.89%     0.02%      -1.45%


SPX summary for PY2 1930 - 2018

Averages      0.22%    -0.34%    -0.19%    -0.19%     0.29%      -0.21%

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

MDD  5/3/1930  8.27% --  5/7/2010  7.60% --  5/5/1970  3.58%


SPX summary for all years 1928 - 2021

Averages      0.08%     0.14%     0.20%    -0.04%     0.14%       0.52%

% Winners       55%       67%       63%       45%       51%         66%

MDD 5/3/1930  8.27% --  5/7/2010  7.60% --  5/4/2000  4.01%

May

Since 1963, over all years, the OTC in May has been up 61% of the time with an average gain of 0.7%.  During the 2nd year of the Presidential Cycle the OTC in May has been up 43% of the time with an average loss of 1.7% (helped by a 13.0% loss in 1970).  The best May ever for the OTC was 1997 (+11.1%), the worst 1970 (-13.0%).

The average month has 21 trading days.  The chart below has been calculated by averaging the daily percentage change 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 daily performance of the OTC in May 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 59% of the time in May with an average loss of 0.1%.  During the 2nd year of the Presidential Cycle the SPX has been up 48% of the time with an average loss of 0.8%.  The best May ever for the SPX was 1933 (+15.9%) the worst 1940 (-24.0%).

The chart below is similar to the one above except it shows the average daily average performance over all years since 1928 for the SPX in May in red and the average daily performance during the 2nd year of the Presidential Cycle, over the same period, in grey.

Since 1979 the Russell 2000 (R2K) has been up 65% of the time in May with an average gain of 1.3%.  During the 2nd year of the Presidential Cycle the R2K has been up 40% of the time with an average loss of 1.1%.  The best May ever for the R2K 1997 (+11.0%), the worst 2010 (-7.7%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in May in magenta and the average daily performance during the 2nd year of the Presidential Cycle in grey.

Since 1885 the Dow Jones Industrial Average (DJIA) has been up 53% of the time in May with an average loss of -0.1%.  During the 2nd year of the Presidential Cycle the DJIA has been up 56% of the time in May with an average gain of 0.4%.  The best May ever for the DJIA 1898 (+14.7%), the worst 1940 (-21.7%)

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

Conclusion

The market is oversold and as mentioned above, new lows declined considerably as the indices fell to a new cycle lows.  The decrease in the number of new lows suggests a good likelihood for a short term rally early next week.

The strongest sectors last week were Transportation (for the 2nd week in a row) and Retail while the weakest were Energy services and Precious Metals (for the 2nd week in a row).

I expect the major averages to be lower on Friday May 6 than they were on Friday April 29.