Technical Market Report For Saturday, Aug. 7
The good news is:
The S&P 500 (SPX) and Dow Jones Industrial Average (DJIA) both closed at all time highs last Friday and the NASDAQ composite (OTC) closed at an all time high last Thursday.
The Negatives
New highs continued to deteriorate while new lows are at threatening levels on both the NASDAQ and NYSE.
The first chart covers the past 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 is near its lowest level since last November while the index is hitting new highs.
The next chart is similar to the first one except it shows the SPX in red and NY NH, in green, has been calculated with NYSE data.
Ditto NY NH and SPX.
The next chart covers the past 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).
New lows declined a bit in the later days of last week, but the indicator trend has been down.
The next chart is similar to the one above except is shows the SPX in red and NY NL has been calculated with NYSE data.
Ditto NY NL and SPX.
The Positives
Last week new highs increased enough to stay ahead of new lows.
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.
OTC HL Ratio managed to hold above the neutral line all of last week.
The next chart is similar to the previous one except it shows the SPX in red and NY HL ratio, in blue, has been calculated with NYSE data.
NY HL Ratio remained in the low 80% area all of last week.
Seasonality
Next week includes the 5 trading days prior to the 2nd Friday of August during the 1st 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 2020 while SPX data runs from 1953 to 2020. There are summaries for both the 1st 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 modest, mixed and a little weaker during the 1st year of the Presidential Cycle than other years.
Report for the week before the 2nd Friday of August. The number following the year is the position in the Presidential Cycle. Daily returns from Monday to 2nd Friday. OTC Presidential Year 1 (PY1) Year Mon Tue Wed Thur Fri Totals 1965-1 0.82% 0.35% 0.45% 0.71% -0.14% 2.18% 1969-1 1.52% -0.42% 0.56% 0.08% 0.33% 2.07% 1973-1 0.37% 0.08% -1.09% 0.02% -0.78% -1.40% 1977-1 -0.31% -0.03% 0.29% 0.13% -0.18% -0.10% 1981-1 -0.25% 0.39% 0.13% 0.19% -0.11% 0.36% 1985-1 -0.78% -0.64% -0.67% 0.17% 0.14% -1.78% 1989-1 0.94% 0.34% -0.19% 0.25% -0.23% 1.11% 1993-1 0.06% -0.20% 0.24% -0.23% 0.16% 0.03% 1997-1 0.70% 1.00% 0.55% -0.38% -1.58% 0.29% Avg 0.13% 0.18% 0.01% 0.00% -0.33% 0.00% 2001-1 -1.55% -0.32% -3.03% -0.15% -0.35% -5.40% 2005-1 -0.62% 0.45% -0.75% 0.78% -0.81% -0.96% 2009-1 -0.40% -1.13% 1.47% 0.53% -1.19% -0.71% 2013-1 0.09% -0.74% -0.32% 0.41% -0.25% -0.80% 2017-1 0.50% -0.21% -0.28% -2.12% 0.64% -1.47% Avg -0.40% -0.39% -0.58% -0.11% -0.39% -1.87% OTC summary for PY1 1965 - 2017 Avg 0.08% -0.08% -0.19% 0.03% -0.31% -0.47% Win% 57% 43% 50% 71% 29% 43% OTC summary for all years 1963 - 2020 Avg -0.32% 0.13% 0.15% 0.08% 0.01% 0.04% Win% 45% 53% 61% 63% 48% 59% SPX PY1 Year Mon Tue Wed Thur Fri Totals 1953-1 -0.12% -0.12% 0.24% -0.20% -0.44% -0.65% 1957-1 -0.88% -1.25% 0.77% -0.28% 0.04% -1.59% 1961-1 -0.01% 0.22% -0.12% 0.31% 0.16% 0.56% 1965-1 -0.24% 0.01% 0.30% 0.29% 0.45% 0.81% 1969-1 -0.51% 0.45% 0.55% 0.07% -0.05% 0.51% 1973-1 0.23% -0.17% -0.94% 0.06% -0.80% -1.62% 1977-1 -0.78% 0.06% 0.89% -0.77% -0.29% -0.88% Avg -0.27% 0.12% 0.14% -0.01% -0.10% -0.13% 1981-1 0.60% 0.99% -0.34% 0.08% -0.76% 0.57% 1985-1 -0.45% -1.41% -0.13% 0.68% -0.33% -1.65% 1989-1 1.60% -0.02% -0.69% 0.38% -1.01% 0.26% 1993-1 0.45% -0.28% 0.22% -0.33% 0.26% 0.33% 1997-1 0.33% 0.22% 0.83% -0.95% -1.85% -1.42% Avg 0.51% -0.10% -0.02% -0.03% -0.74% -0.38% 2001-1 -1.14% 0.33% -1.73% -0.01% 0.57% -1.99% 2005-1 -0.27% 0.67% -0.18% 0.71% -0.60% 0.33% 2009-1 -0.33% -1.27% 1.15% 0.69% -0.85% -0.61% 2013-1 -0.15% -0.57% -0.38% 0.39% -0.36% -1.07% 2017-1 0.16% -0.24% -0.04% -1.45% 0.13% -1.43% Avg -0.35% -0.22% -0.24% 0.07% -0.22% -0.95% SPX summary for PY1 1963 - 2017 Avg -0.09% -0.14% 0.02% -0.02% -0.34% -0.56% Win% 35% 47% 47% 59% 35% 41% SPX summary for all years 1953 - 2020 Avg -0.30% 0.17% 0.08% 0.07% 0.05% 0.07% Win% 43% 59% 54% 49% 51% 56%
Conclusion
It was kind of a dull week in the equity markets. The breadth numbers did not change much and neither did the indices. The modest upward bias enabled the blue chip indices to score marginal all time highs.
The strongest sectors last week were Banks and Utilities while the weakest were Precious Metals (down from the top last week) and Energy Services .
I expect the major averages to be higher on Friday August 13 than they were on Friday August 6.