The good news is:

• All of the major indices hit all time highs last week and the NASDAQ composite (OTC) and Russell 2000 (R2K) closed at all time highs last Friday.

The Negatives

Negatives are hard to find; liquidity is at an extreme.

The Positives

New highs have been expanding while new lows have been in single digits.

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 first trading day of each month.

OTC NH confirmed the OTC high; that implies higher prices ahead.

 

The next chart is similar to the first one except it shows the S&P 500 (SPX) in red and NY NH has been calculated with NYSE data.

There was a little weakness in NY NH, nothing to worry about now.

 

The next chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue.  Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

It does not get much better than this.

 

The next chart is similar to the one above except it shows the OTC in blue and OTC HL Ratio, in red, has been calculated with NASDAQ data.

Ditto

 

Seasonality

Next week includes the last 5 trading days of January during the 1^st 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 1928 to 2020.  There are summaries for both the 1^st year of the Presidential Cycle and all years combined. 

Average returns for the coming week have been positive by all measures.

Report for the last 5 days of January.

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 1 (PY1)

               Day5      Day4      Day3      Day2      Day1      Totals

 1965-1       0.61% 1   0.39% 2   0.62% 3   0.75% 4   0.36% 5     2.72%

 1969-1       0.23% 1  -0.14% 2   0.09% 3   0.22% 4   0.39% 5     0.79%

 1973-1      -1.47% 3  -0.56% 5   0.00% 1  -1.00% 2  -0.19% 3    -3.22%

 1977-1      -0.32% 2  -0.57% 3  -0.49% 4  -0.33% 5  -0.19% 1    -1.89%

 

 1981-1      -1.20% 1   1.05% 2  -0.41% 3   0.26% 4  -0.04% 5    -0.34%

 1985-1       0.61% 5   0.38% 1   0.41% 2   0.87% 3   0.04% 4     2.32%

 1989-1       0.52% 3   0.78% 4   0.22% 5   0.32% 1   0.52% 2     2.35%

 1993-1       0.76% 1   0.03% 2  -1.31% 3  -0.46% 4   0.24% 5    -0.74%

 1997-1      -0.81% 1   0.12% 2   0.06% 3   1.17% 4   0.65% 5     1.19%

 

 Avg         -0.02%     0.47%    -0.21%     0.43%     0.28%       0.95%

 

 2001-1      -3.67% 4   0.98% 5   2.05% 1   0.00% 2  -2.31% 3    -2.95%

 2005-1       0.56% 2   1.29% 3   0.05% 4  -0.55% 5   1.31% 1     2.66%

 2009-1       0.82% 1   1.04% 2   3.55% 3  -3.24% 4  -2.08% 5     0.09%

 2013-1       0.62% 5   0.15% 1  -0.02% 2  -0.36% 3  -0.01% 4     0.38%

 2017-1       0.99% 3  -0.02% 4   0.10% 5  -0.83% 1   0.02% 2     0.26%

 

 Avg         -0.14%     0.69%     1.15%    -1.00%    -0.62%       0.09%

 

OTC summary for PY1 1965 - 2017

Averages     -0.13%     0.35%     0.35%    -0.23%    -0.09%       0.26%

% Winners       64%       71%       64%       50%       57%         64%

MDD  1/30/2009  5.26% --  1/25/2001  3.67% --  1/31/1973  3.19%

 

OTC summary for all years 1963 - 2020

Averages     -0.05%     0.18%     0.06%     0.01%     0.23%       0.42%

% Winners       46%       60%       59%       56%       64%         57%

MDD 1/28/2000  6.73% --  1/30/2009  5.26% --  1/30/1970  4.76%

 

SPX PY1

               Day5      Day4      Day3      Day2      Day1      Totals

 1929-1      -0.20% 6  -0.31% 1   0.04% 2   0.35% 3   1.14% 4     1.02%

 1933-1      -0.70% 4  -0.14% 5  -1.14% 6   0.29% 1  -0.57% 2    -2.27%

 1937-1      -1.46% 2   0.80% 3  -0.11% 4   0.79% 5   0.34% 6     0.35%

 

 1941-1       0.00% 1  -0.57% 2  -2.01% 3  -1.76% 4   0.30% 5    -4.05%

 1945-1       0.98% 5   0.45% 6   0.15% 1  -0.59% 2   0.07% 3     1.05%

 1949-1      -0.26% 3  -0.26% 4  -0.33% 5   0.20% 6  -0.07% 1    -0.72%

 1953-1      -0.19% 1   0.12% 2   0.31% 3   0.27% 4   0.69% 5     1.19%

 1957-1      -0.47% 5  -0.74% 1   0.49% 2   0.45% 3  -0.42% 4    -0.68%

 

 Avg          0.01%    -0.20%    -0.28%    -0.29%     0.11%      -0.64%

 

 1961-1       0.13% 3   0.15% 4   1.02% 5   1.19% 1  -0.31% 2     2.19%

 1965-1       0.14% 1   0.09% 2   0.33% 3   0.29% 4   0.09% 5     0.94%

 1969-1       0.02% 1   0.01% 2   0.10% 3   0.04% 4   0.45% 5     0.61%

 1973-1      -1.26% 3  -0.24% 5  -0.38% 1  -0.16% 2   0.17% 3    -1.86%

 1977-1      -0.12% 2  -0.77% 3  -0.54% 4   0.14% 5   0.10% 1    -1.18%

 

 Avg         -0.22%    -0.15%     0.11%     0.30%     0.10%       0.14%

 

 1981-1      -0.30% 1   0.99% 2  -0.59% 3  -0.08% 4  -0.53% 5    -0.52%

 1985-1       0.36% 5   0.03% 1  -0.03% 2   1.15% 3   0.13% 4     1.65%

 1989-1       0.23% 3   0.88% 4   0.73% 5   0.40% 1   0.84% 2     3.08%

 1993-1       0.89% 1  -0.01% 2  -0.42% 3   0.13% 4   0.03% 5     0.62%

 1997-1      -0.71% 1   0.00% 2   0.98% 3   1.51% 4   0.25% 5     2.03%

 

 Avg          0.09%     0.38%     0.13%     0.62%     0.14%       1.37%

 

 2001-1      -0.50% 4  -0.19% 5   0.68% 1   0.70% 2  -0.56% 3     0.13%

 2005-1       0.40% 2   0.48% 3   0.04% 4  -0.27% 5   0.85% 1     1.50%

 2009-1       0.56% 1   1.09% 2   3.36% 3  -3.31% 4  -2.28% 5    -0.59%

 2013-1       0.54% 5  -0.18% 1   0.51% 2  -0.39% 3  -0.26% 4     0.22%

 2017-1       0.80% 3  -0.07% 4  -0.09% 5  -0.60% 1  -0.09% 2    -0.05%

 

 Avg          0.36%     0.23%     0.90%    -0.77%    -0.47%       0.24%

 

SPX summary for PY1 1929 - 2017

Averages     -0.05%     0.07%     0.13%     0.03%     0.02%       0.20%

% Winners       48%       48%       57%       65%       61%         61%

MDD  1/30/2009  5.52% --  1/30/1941  4.29% --  1/31/1933  2.25%

 

SPX summary for all years 1928 - 2020

Averages     -0.05%     0.15%     0.02%     0.09%     0.23%       0.45%

% Winners       52%       52%       46%       60%       61%         56%

MDD 1/29/1938  6.33% --  1/30/2009  5.52% --  1/30/1932  5.05%

Conclusion

It’s the same old story; strong breadth with the secondaries leading the blue chips upward; that is about as good as it gets.

The strongest sectors last week were Electronics and Telecom while the weakest were Basic Materials and Precious Metals. 

I expect the major averages to be higher on Friday January 29 than they were on Friday January 22.