The good news is:

• There are some breadth non confirmations of the recent lows.

The Negatives

• New lows outnumbered new highs on both the NYSE and Nasdaq at the every day last week.

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 turned downward and has remained negative for about 7 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 fell deeper into negative territory 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).  

Attempting to put a positive spin on this chart; I want to point out that NY NL did not confirm the new cycle price low for the SPX.  Unfortunately, I think the odds are pretty good that NY NL will catch up to the downside. 

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 Positives

There is a fundamental problem, which is liquidity is drying up.

Seasonality

Next week includes the 5 trading days prior to the 4th Friday of June 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 1953 to 2021.  There are summaries for both the 2nd 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 negative by all measures.

Report for the week before the 4th Friday of June.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday through the 4th Friday.


OTC Presidential Year 2 (PY2)

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1966-2  -0.03%   0.22%   0.30%   0.27%  -0.82%  -0.06%

 1970-2   0.87%  -0.03%  -2.69%  -0.34%  -1.10%  -3.29%

 1974-2  -0.29%   0.60%  -1.36%  -1.84%  -1.13%  -4.03%

 1978-2  -0.62%  -0.72%  -1.15%   0.04%   0.05%  -2.40%


 1982-2  -0.30%   0.63%   1.07%   0.15%  -0.37%   1.18%

 1986-2  -0.01%   0.53%   0.83%   0.16%   0.16%   1.67%

 1990-2  -1.45%  -0.06%   0.06%   0.10%  -0.42%  -1.76%

 1994-2  -1.44%  -1.40%   0.56%  -1.67%  -1.01%  -4.96%

 1998-2   1.38%   2.14%   1.79%  -0.77%   0.33%   4.88%


 Avg     -0.36%   0.37%   0.86%  -0.40%  -0.26%   0.20%


 2002-2   1.34%  -2.49%   0.38%   2.09%   0.27%   1.60%

 2006-2  -0.92%  -0.16%   1.62%  -0.85%  -0.07%  -0.38%

 2010-2  -0.90%  -1.19%  -0.33%  -1.63%   0.27%  -3.78%

 2014-2   0.01%  -0.42%   0.68%  -0.02%   0.43%   0.69%

 2018-2   0.01%  -0.28%   0.72%  -0.88%  -0.26%  -0.69%


 Avg     -0.09%  -0.91%   0.61%  -0.26%   0.13%  -0.51%


OTC summary for PY2 1966 - 2018 

 Avg     -0.17%  -0.19%   0.18%  -0.37%  -0.26%  -0.81%

 Win%       36%     36%     71%     43%     43%     36%


OTC summary for all years 1963 - 2021

 Avg     -0.07%   0.04%   0.09%  -0.03%  -0.19%  -0.15%

 Win%       47%     60%     54%     60%     52%     50%


SPX PY2

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1954-2   0.07%   0.07%   0.17%   0.45%  -0.21%   0.55%

 1958-2  -0.36%  -0.38%   0.25%   0.47%   0.13%   0.11%


 1962-2  -0.27%  -0.36%  -1.37%  -2.17%  -1.70%  -5.87%

 1966-2  -0.03%   0.27%   0.16%  -0.40%   0.09%   0.08%

 1970-2  -0.53%  -2.45%  -1.06%   0.07%  -0.74%  -4.72%

 1974-2   0.26%   1.47%  -1.47%  -1.55%  -0.36%  -1.65%

 1978-2   0.07%  -1.01%  -0.52%   0.24%  -0.41%  -1.62%


 Avg     -0.10%  -0.42%  -0.85%  -0.76%  -0.62%  -2.75%


 1982-2  -0.07%   1.03%   1.70%  -0.28%  -0.63%   1.74%

 1986-2  -0.94%   0.72%   0.77%  -0.08%   0.35%   0.82%

 1990-2  -1.66%   0.45%   0.18%   0.38%  -1.40%  -2.06%

 1994-2  -0.65%  -0.91%   0.39%  -0.76%  -1.52%  -3.45%

 1998-2   0.24%   1.48%   1.20%  -0.32%   0.35%   2.94%


 Avg     -0.62%   0.55%   0.85%  -0.21%  -0.57%   0.00%


 2002-2   0.36%  -1.67%  -0.27%   1.76%   0.00%   0.18%

 2006-2  -0.91%   0.00%   0.97%  -0.53%  -0.09%  -0.55%

 2010-2  -0.39%  -1.61%  -0.30%  -1.68%   0.29%  -3.69%

 2014-2  -0.01%  -0.64%   0.49%  -0.12%   0.19%  -0.09%

 2018-2  -0.21%  -0.40%   0.17%  -0.63%   0.19%  -0.89%


 Avg     -0.23%  -0.86%   0.21%  -0.24%   0.14%  -1.01%


SPX summary for PY2 1954 - 2018 

 Avg     -0.30%  -0.23%   0.09%  -0.30%  -0.34%  -1.07%

 Win%       29%     41%     65%     35%     44%     41%


SPX summary for all years 1953 - 2021

 Avg     -0.14%   0.11%   0.00%  -0.04%  -0.20%  -0.25%

 Win%       42%     56%     49%     51%     45%     49%

Money Supply and Interest Rates

The chart below was supplied by Gordon Harms.

This is a FastTrack chart showing the SPX in red, M2 money supply in green an advance decline line of Junk Bonds in white and 2 relative strength indicators in yellow.  The relative strength indicators show a comparison of the SPX to M2.

Treasury rates at their close last Friday and their changes from last month:

• 2yr yield 3.192% up from 2.583%
• 5yr yield 3.348% up from 2.806%
• 10yr yield 3.236% up from 2.792% 
• 30yr yield 3.282% up from 2.989%
• The 5 year yield is higher than both the 10 yr and 30 year.

Conclusion

The market had another bad week;  there are some non confirmations.

The non confirmations were likely caused by prices falling faster that the indicators are capable of.

The strongest sectors last week were Biotech and Health care while the weakest were Electronics (for the 2nd week) and Basic Materials.

I expect the major averages to be lower on Friday June 24 than they were on Friday June 17.