Technical Market Report for Saturday, June 12, 2021

The good news is that the S&P 500 (SPX) closed at an all-time high last Friday while the secondaries were outperforming the blue chips. 

The Negatives

The raw numbers of new highs have deteriorated recently, although the current levels do not indicate imminent danger.

The first chart covers the past six months, showing the Nasdaq composite (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. The OTC NH is not confirming rising prices, while the OTC is only 0.5% from its all-time high.

The next chart is similar to the first one, except it shows the SPX in red and the NY NH in green. The information has been calculated with NYSE data. Here is an unambiguous non-confirmation of the all-time high of the SPX by the NY NH.

The Positives

New lows are minimal. Over the past two weeks, the secondaries have been leading the blue chips upward.

The next chart covers the past six months, showing the OTC in blue, and a 40% trend (four-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. The OTC HL Ratio finished the week at a very strong 93%.

The next chart is similar to the one above, except it shows the SPX in red and the NY HL ratio in blue. The information has been calculated with NYSE data. The NY HL Ratio rose to a very strong 97%. 

Seasonality

Next week includes the five trading days prior to the third Friday of June, all during the first 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 first year of the Presidential Cycle and all years combined. Prior to 1953 the market traded six days a week, so that data has been ignored.

Average returns for the coming week have been historically negative during the first year of the Presidential Cycle and mixed over all years. The number following the year is the position in the Presidential Cycle.

OTC Presidential Year 1 (PY1)

    Year       Mon      Tue       Wed      Thur      Fri      Totals

 1965-1   0.38%  -1.96%   1.05%   0.72%   0.65%   0.85%

 1969-1  -0.11%  -0.65%  -0.86%  -0.70%  -0.60%  -2.91%

 1973-1  -0.66%   1.70%  -0.44%  -0.74%  -1.26%  -1.39%

 1977-1   0.22%   0.43%  -0.03%   0.56%   0.40%   1.58%

 1981-1   0.09%  -1.07%   0.01%  -0.86%   0.39%  -1.44%

 1985-1  -0.20%   0.19%   0.08%  -0.27%   0.47%   0.27%

 1989-1  -0.06%  -0.59%  -0.02%  -0.79%   0.02%  -1.42%

 1993-1   0.46%   0.13%  -0.16%  -0.04%  -0.91%  -0.52%

 1997-1   0.63%   0.78%  -0.74%   1.03%   0.00%   1.69%

   Avg:     0.19%  -0.11%  -0.16%  -0.19%  -0.01%  -0.28%

 2001-1  -2.00%  -0.04%  -2.23%  -3.66%  -0.77%  -8.69%

 2005-1   0.29%   0.00%   0.28%   0.69%   0.05%   1.31%

 2009-1  -2.28%  -1.11%   0.66%  -0.02%   1.09%  -1.66%

 2013-1   0.83%   0.87%  -1.12%  -2.28%  -0.22%  -1.92%

 2017-1  -0.52%   0.73%  -0.41%   0.00%  -0.22%  -0.43%

   Avg:    -0.74%   0.09%  -0.56%  -1.32%  -0.01%  -2.28%

OTC Summary for PY1 1965 - 2017 

•  Avg:    -0.21%  -0.04%  -0.28%  -0.49%  -0.07%  -1.05%
•  Win%:      50%     57%     36%     31%     54%     36%

OTC Summary for All Years 1963 - 2020

•  Avg:    -0.15%   0.19%   0.01%   0.00%  -0.02%   0.04%
•  Win%:      45%     62%     61%     50%     54%     53%

SPX PY1

    Year       Mon      Tue      Wed     Thur      Fri      Totals

 1953-1  -0.84%  -0.30%   1.27%  -0.04%   0.00%   0.10%

 1957-1   0.19%  -0.41%  -0.67%  -0.61%  -0.59%  -2.09%

 1961-1  -0.77%  -0.53%   0.27%  -0.44%  -0.78%  -2.24%

 1965-1  -1.30%   0.57%   0.84%   0.63%  -0.47%   0.27%

 1969-1  -0.33%  -0.38%  -0.14%  -0.58%  -0.59%  -2.02%

 1973-1  -0.31%   1.49%  -0.64%  -1.12%  -1.22%  -1.79%

 1977-1   0.28%   1.13%  -0.25%   0.24%   0.12%   1.53%

   Avg:    -0.49%   0.46%   0.02%  -0.25%  -0.59%  -0.85%

 1981-1   0.09%  -1.09%   0.89%  -1.26%   0.48%  -0.90%

 1985-1  -0.30%   0.43%  -0.38%   0.05%   1.54%   1.35%

 1989-1  -0.14%  -0.71%  -0.02%  -1.16%   0.40%  -1.64%

 1993-1   0.10%  -0.32%   0.26%   0.25%  -1.08%  -0.80%

 1997-1   0.07%   0.06%  -0.59%   1.00%   0.08%   0.61%

   Avg:    -0.04%  -0.33%   0.03%  -0.22%   0.28%  -0.27%

 2001-1  -0.84%   0.12%  -1.13%  -1.75%  -0.45%  -4.06%

 2005-1   0.23%   0.26%   0.22%   0.36%   0.50%   1.56%

 2009-1  -2.38%  -1.27%  -0.14%   0.84%   0.31%  -2.63%

 2013-1   0.76%   0.78%  -1.39%  -2.50%   0.27%  -2.08%

 2017-1  -0.10%   0.45%  -0.10%  -0.21%   0.03%   0.07%

   Avg:    -0.47%   0.07%  -0.51%  -0.65%   0.13%  -1.43%

SPX Summary for PY1 1953 - 2017 

•  Avg:    -0.33%   0.02%  -0.10%  -0.37%  -0.09%  -0.87%
•  Win%:      41%     53%     35%     41%     56%     41%

SPX Summary for All Years 1953 - 2020

•  Avg:    -0.06%   0.19%  -0.01%  -0.11%  -0.02%  -0.02%
•  Win%:      57%     59%     46%     50%     56%     56%

Money Supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms. M2 growth continued to level off. Perhaps the Fed has quit calculating M2.

Treasury rates at their close last Friday, as well as their changes from last month:

• 2-year yield: 0.149%, down from 0.153%.
• 5-year yield: 0.744%, down from 0.814%.
• 10-year yield: 1.453%, down from 1.626%.
• 30-year yield: 2.141%, down from 2.347%.

The next chart is a close up showing just the past year from the chart above.

Conclusion

Everything has been going in the right direction, but the seasonality for next week has been historically negative. The strongest sectors last week were utilities and telecom, while the weakest were transportation and banks.

I expect the major averages to be higher on Friday, June 18 than they were on Friday, June 11. Last week, the Dow Jones Industrial Average was down while everything else was up. So I am calling last week's positive forecast a tie.