The good news is:

• The market had another good week.

The Negatives

It was bizarre watching the market jump upward with the announcement of an increase in the Fed Funds interest rate.

New lows exceeded new highs every day last week on both the NYSE and Nasdaq.

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 rose last week to its highest level in nearly 4 months, however it has remained in negative territory for 8 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 rose last week to its highest level in over a month, however, it finished the week in negative territory,

The Positives

New lows continued to decline last week.  

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 rose to its best level since January..  

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 ditto.

The next chart covers the last 6 months showing the OTC in blue and a 10% trend of Nasdaq new highs in green.

For the first time in several months we are seeing some life in the new high indicators.

The next chart is similar to the one above except it shows the SPX in red and NY NH has been calculated with NYSE data.

NY NH ditto.

Seasonality

Next week includes the first 5 trading days of August 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, but mostly negative..

Report for the first 5 days of August.

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       0.00% 1  -1.26% 2  -0.09% 3   0.39% 4   0.62% 5    -0.34%

 1970-2      -0.83% 1  -1.25% 2   0.17% 3   0.07% 4  -0.44% 5    -2.28%

 1974-2      -0.51% 4  -0.33% 5   0.39% 1   1.23% 2   1.63% 3     2.41%

 1978-2       0.39% 2   1.06% 3   0.67% 4   0.53% 5   0.39% 1     3.04%


 1982-2       0.61% 1  -0.24% 2  -0.84% 3  -0.85% 4  -0.94% 5    -2.26%

 1986-2      -0.19% 5  -1.08% 1   0.02% 2  -0.55% 3   0.09% 4    -1.71%

 1990-2      -0.53% 3  -1.61% 4  -2.67% 5  -4.17% 1   0.51% 2    -8.47%

 1994-2       0.37% 1  -0.01% 2  -0.15% 3  -0.49% 4  -0.21% 5    -0.48%

 1998-2      -1.14% 1  -3.54% 2   0.15% 3   2.29% 4   0.97% 5    -1.28%


 Avg         -0.18%    -1.29%    -0.70%    -0.75%     0.08%      -2.84%


 2002-2      -3.63% 4  -2.51% 5  -3.36% 1   4.44% 2   1.70% 3    -3.36%

 2006-2      -1.41% 2   0.82% 3   0.65% 4  -0.35% 5  -0.60% 1    -0.89%

 2010-2       1.80% 1  -0.52% 2   0.88% 3  -0.46% 4  -0.20% 5     1.51%

 2014-2      -0.39% 5   0.72% 1  -0.71% 2   0.05% 3  -0.46% 4    -0.79%

 2018-2       0.46% 3   1.24% 4   0.12% 5   0.61% 1   0.31% 2     2.74%


 Avg         -0.63%    -0.05%    -0.48%     0.86%     0.15%      -0.16%


OTC summary for PY2 1966 - 2018

Averages     -0.36%    -0.61%    -0.34%     0.20%     0.24%      -0.87%

% Winners       36%       29%       57%       57%       57%         29%

MDD  8/5/2002  9.20% --  8/6/1990  8.72% --  8/4/1998  4.64%


OTC summary for all years 1963 - 2021

Averages      0.01%    -0.15%    -0.10%     0.05%     0.13%      -0.07%

% Winners       55%       41%       53%       66%       58%         54%

MDD 8/5/2002  9.20% --  8/6/1990  8.72% --  8/5/2011  8.13%

SPX PY2

               Day1      Day2      Day3      Day4      Day5      Totals

 1930-2      -0.47% 5   0.57% 6   1.37% 1   0.00% 2  -1.58% 3    -0.12%

 1934-2       3.11% 3   0.67% 4  -1.22% 5  -2.02% 6  -0.11% 1     0.42%

 1938-2      -1.21% 1   1.31% 2  -0.89% 3   0.65% 4   2.26% 5     2.12%


 1942-2       0.00% 6   0.12% 1  -0.23% 2  -0.94% 3  -0.12% 4    -1.17%

 1946-2       0.28% 4   0.06% 5  -0.61% 1  -0.28% 2   0.95% 3     0.40%

 1950-2       1.01% 2  -0.39% 3   0.22% 4   0.83% 5   1.49% 1     3.17%

 1954-2       0.36% 1  -0.19% 2  -0.10% 3  -0.42% 4  -1.27% 5    -1.62%

 1958-2       0.64% 5   0.95% 1  -0.40% 2  -0.61% 3   0.65% 4     1.23%


 Avg          0.46%     0.11%    -0.22%    -0.28%     0.34%       0.40%


 1962-2      -0.82% 3   0.40% 4   0.24% 5  -0.64% 1  -0.68% 2    -1.50%

 1966-2      -1.54% 1   0.02% 2   1.00% 3   0.94% 4   0.08% 5     0.50%

 1970-2      -1.32% 1   0.22% 2  -0.01% 3  -0.13% 4   0.26% 5    -0.98%

 1974-2      -0.71% 4  -0.20% 5   0.89% 1   1.55% 2   2.65% 3     4.18%

 1978-2      -0.02% 2   2.25% 3   0.57% 4   0.40% 5  -0.36% 1     2.84%


 Avg         -0.88%     0.54%     0.54%     0.42%     0.39%       1.01%


 1982-2       1.76% 1  -1.06% 2  -1.57% 3  -0.92% 4  -1.38% 5    -3.16%

 1986-2      -0.51% 5   0.46% 1   0.44% 2  -0.08% 3   0.08% 4     0.39%

 1990-2      -0.18% 3  -1.14% 4  -1.88% 5  -3.02% 1   0.12% 2    -6.10%

 1994-2       0.60% 1  -0.10% 2   0.20% 3  -0.66% 4  -0.29% 5    -0.25%

 1998-2      -0.74% 1  -3.63% 2   0.87% 3   0.76% 4  -0.02% 5    -2.76%


 Avg          0.19%    -1.09%    -0.39%    -0.79%    -0.30%      -2.38%


 2002-2      -2.96% 4  -2.31% 5  -3.43% 1   2.99% 2   2.00% 3    -3.70%

 2006-2      -0.45% 2   0.60% 3   0.13% 4  -0.07% 5  -0.28% 1    -0.07%

 2010-2       2.20% 1  -0.48% 2   0.61% 3  -0.13% 4  -0.37% 5     1.83%

 2014-2      -0.29% 5   0.72% 1  -0.97% 2   0.00% 3  -0.56% 4    -1.09%

 2018-2      -0.10% 3   0.49% 4   0.46% 5   0.35% 1   0.28% 2     1.49%


 Avg         -0.32%    -0.20%    -0.64%     0.63%     0.22%      -0.31%


SPX summary for PY2 1930 - 2018

Averages     -0.06%    -0.03%    -0.19%    -0.06%     0.17%      -0.17%

% Winners       35%       61%       52%       39%       48%         48%

MDD  8/5/2002  8.45% --  8/6/1990  6.10% --  8/6/1982  4.84%


SPX summary for all years 1928 - 2021

Averages      0.09%    -0.02%     0.09%    -0.12%     0.14%       0.17%

% Winners       52%       50%       52%       50%       56%         50%

MDD 8/5/2002  8.45% --  8/5/2011  7.19% --  8/6/1990  6.10%

August

Since 1963, over all years, the OTC in August has been up 61% of the time with an average gain of 0.6%.  During the 2nd year of the Presidential Cycle the OTC in August has been up 57% of the time with an average loss of -1.7%, helped considerably by a 19.9% loss in 1998, a 13.0% loss in 1990, a 10.9% loss in 1974 and a 9.9% loss in 1966. The best August ever for the OTC was 2000 (+11.7%), the worst 1998 (-19.9%).

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 August 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 60% of the time in August with an average gain of 0.7%.  During the 2nd year of the Presidential Cycle the SPX has been up 65% of the time with an average loss of -0.3%.  The best August ever for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).

The chart below is similar to the one above except it shows the average daily performance over all years since 1928 for the SPX in August 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 58% of the time in August with an average gain of 0.3%.  During the 2nd year of the Presidential Cycle the R2K has been up 60% of the time with an average loss of -1.3%.  The best August ever for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)

The chart below is similar to those above except it shows the average daily performance of the R2K, over all years since 1979, in August 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 65% of the time in August with an average gain of 1.2%.  During the 2nd year of the Presidential Cycle the DJIA has been up 67% of the time in August with an average gain of 0.6%.  The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)

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

Conclusion

The market had a good week.  All of the major indices advanced and new lows declined to their lowest levels in months.  New highs also increased last week, but never exceeded the number of new lows.  It was interesting to see the market celebrate an increase in the Fed Funds rate.

The strongest sectors last week were Utilities and Banks while the weakest were Retail and Biotech.

I expect the major averages to be lower on Friday August 5 than they were on Friday July 29.

Last week's negative forecast was a miss.

More By This Author:

Technical Market Report For Saturday, July 23
Technical Market Report For Saturday, July 16
Technical Market Report For Saturday, July 9