Technical Market Report for Saturday, June 19, 2021

The good news is that the S&P 500 (SPX) and the Nasdaq composite (OTC) both closed at all-time highs last Monday.

The Negatives

New highs continued to deteriorate as prices hit new highs. 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 failed to confirm the all-time high by a wide margin last Monday.

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. Similar action was seen for the NY NH and the SPX.

The Positives

New highs outnumbered new lows every day on both exchanges last week.

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 comfortable 73%.

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 finished the week at a strong 83%. 

Seasonality

Next week includes the five trading days prior to the fourth Friday of June 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 modest and a little better during the first year of the Presidential Cycle than other 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  -0.50%  -0.11%  -0.11%  -0.78%  -1.51%  -3.01%

 1969-1  -0.66%   0.09%  -0.03%   0.09%   0.23%  -0.29%

 1973-1  -1.46%   0.19%  -0.76%   0.21%   0.59%  -1.23%

 1977-1   0.11%   0.11%  -0.05%   0.39%   0.49%   1.06%

 1981-1  -0.44%   0.29%  -0.21%   0.25%   0.21%   0.09%

 1985-1   0.44%   0.80%   0.38%   0.66%   0.29%   2.57%

 1989-1  -0.25%  -0.34%  -0.16%   0.33%   0.68%   0.26%

 1993-1  -0.12%  -0.29%  -0.29%   0.57%   0.88%   0.76%

 1997-1  -0.88%   1.26%  -0.43%  -0.68%   0.13%  -0.60%

   Avg:    -0.25%   0.35%  -0.14%   0.23%   0.44%   0.62%

 2001-1  -1.96%   0.21%   1.93%   1.36%  -1.17%   0.37%

 2005-1  -0.09%   0.14%   0.05%  -1.02%  -0.84%  -1.77%

 2009-1  -3.35%  -0.07%   1.55%   2.08%   0.47%   0.68%

 2013-1  -1.09%   0.82%   0.85%   0.76%   0.04%   1.38%

 2017-1   1.41%  -0.81%   0.74%   0.04%   0.46%   1.84%

   Avg:     -1.02%   0.06%   1.02%   0.64%  -0.21%   0.50%

OTC Summary for PY1 1965 - 2017 

•  Avg:     -0.63%   0.16%   0.25%   0.30%   0.07%   0.15%
•  Win%:       21%     64%     43%     79%     79%     64%

OTC Summary for All Years 1963 - 2020

•  Avg:     -0.08%   0.03%   0.09%  -0.04%  -0.19%  -0.20%
•  Win%:       46%     60%     54%     60%     53%     49%

SPX PY1

    Year       Mon      Tue      Wed      Thur      Fri      Totals

 1953-1   0.50%   0.67%  -0.12%   0.42%   0.08%   1.54%

 1957-1  -0.78%   0.79%  -0.13%   0.36%   0.23%   0.47%

 1961-1  -0.92%   0.88%  -0.02%  -0.37%   0.40%  -0.02%

 1965-1  -0.34%   0.19%  -0.63%  -1.31%  -0.60%  -2.69%

 1969-1  -0.46%   1.13%  -0.32%   0.25%   0.08%   0.69%

 1973-1  -1.43%   0.38%   0.43%  -1.18%   0.47%  -1.32%

 1977-1   0.45%   0.32%  -0.28%   0.16%   0.57%   1.22%

   Avg:    -0.54%   0.58%  -0.16%  -0.49%   0.19%  -0.43%

 1981-1  -0.24%   1.06%  -0.52%   0.11%  -0.19%   0.23%

 1985-1  -0.24%   0.31%   0.17%   0.62%   0.32%   1.18%

 1989-1   0.17%  -0.20%  -0.24%   0.57%   1.76%   2.07%

 1993-1   0.57%  -0.06%  -0.61%   0.77%   0.22%   0.89%

 1997-1  -2.23%   2.02%  -0.82%  -0.60%   0.41%  -1.23%

    Avg:    -0.40%   0.63%  -0.40%   0.30%   0.51%   0.63%

 2001-1  -0.49%   0.34%   0.87%   1.14%  -0.95%   0.92%

 2005-1  -0.07%  -0.20%   0.02%  -1.08%  -0.76%  -2.10%

 2009-1  -3.06%   0.23%   0.65%   2.14%  -0.15%  -0.18%

 2013-1  -1.21%   0.95%   0.96%   0.62%  -0.43%   0.89%

 2017-1   0.83%  -0.67%  -0.06%  -0.05%   0.16%   0.22%

   Avg:     -0.80%   0.13%   0.49%   0.55%  -0.43%  -0.05%

SPX Summary for PY1 1953 - 2017 

•  Avg:    -0.53%   0.48%  -0.04%   0.15%   0.10%   0.16%
•  Win%:      29%     76%     35%     65%     65%     65%

SPX Summary for All Years 1953 - 2020

•  Avg:    -0.16%   0.11%   0.00%  -0.05%  -0.21%  -0.29%
•  Win%:      41%     55%     50%     51%     45%     48%

Conclusion

The market had a temper tantrum which coincided with a seasonally weak period. Tops take a while to develop, and this one has a way to go. The missing indication is a build up of new lows.

The strongest sectors last week were health care and internet, while the weakest were precious metals and basic materials. I expect the major averages to be higher on Friday, June 25 than they were on Friday, June 18. Last week's positive forecast was a miss.