Technical Market Report for Saturday, June 5

The good news is that last week, like the week before, saw new lows contract and the secondaries outperform the blue chips. 

The Negatives

The raw numbers of new highs have deteriorated recently, although the current levels do not indicate eminent 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 does not look to be confirming rising prices.

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 is seen in this chart.

The Positives

The number of new lows has declined to the point where they are no longer a matter of concern, and the secondaries have taken a modest upward lead.

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 last day on the chart below was truncated. The OTC HL Ratio recovered to a strong 88% last week.

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 96%. 

Seasonality

Next week includes the five trading days prior to the second 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 modestly negative. 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   0.14%  -0.55%  -1.55%  -1.45%  -0.55%  -3.95%

 1969-1  -0.85%  -0.83%  -0.53%  -0.89%  -1.79%  -4.89%

 1973-1  -1.50%   0.93%  -0.01%   0.86%   1.12%   1.40%

 1977-1  -0.08%   0.06%   0.44%   0.04%   0.46%   0.91%

 1981-1  -0.21%  -0.38%   0.18%   0.88%   0.19%   0.66%

 1985-1  -0.11%  -0.06%  -0.30%  -0.94%   0.36%  -1.06%

 1989-1  -0.84%   0.03%   0.95%   0.40%  -0.07%   0.46%

 1993-1  -1.05%  -0.99%   0.22%  -0.17%   0.75%  -1.25%

 1997-1   0.51%  -0.73%   0.44%   0.24%   0.83%   1.30%

   Avg:     -0.34%  -0.42%   0.30%   0.08%   0.41%   0.02%

 2001-1   0.30%   3.61%  -0.72%   2.09%  -2.16%   3.12%

 2005-1   0.21%  -0.41%  -0.34%   0.81%  -0.67%  -0.40%

 2009-1  -0.38%   0.96%  -0.38%   0.50%  -0.19%   0.51%

 2013-1   0.13%  -1.06%  -1.06%   1.32%  -0.63%  -1.30%

 2017-1  -0.16%  -0.33%   0.36%   0.39%  -1.80%  -1.55%

   Avg:      0.02%   0.55%  -0.43%   1.02%  -1.09%   0.08%

OTC Summary for PY1 1965 - 2017 

•  Avg:     -0.28%   0.02%  -0.17%   0.29%  -0.30%  -0.43%
•  Win%:       36%     36%     43%     71%     43%     50%

OTC Summary for All Years 1963 - 2020

•  Avg:     -0.15%  -0.16%   0.06%  -0.04%   0.04%  -0.26%
•  Win%:       52%     31%     54%     63%     59%     38%

SPX PY1

   Year       Mon       Tue       Wed      Thur      Fri      Totals

 1953-1  -0.33%  -1.71%  -0.25%   0.89%   0.29%  -1.11%

 1957-1  -0.52%   1.14%   0.23%   0.19%   0.02%   1.05%

 1961-1   0.52%  -0.28%  -0.37%   0.05%  -0.01%  -0.10%

 1965-1  -0.26%  -1.09%  -1.04%  -0.36%   0.46%  -2.30%

 1969-1  -0.90%  -0.77%  -0.87%  -1.30%   0.40%  -3.44%

 1973-1  -0.92%   1.60%  -0.30%   1.47%   1.12%   2.97%

 1977-1  -0.47%   0.51%   0.48%  -0.06%   0.33%   0.79%

   Avg:    -0.41%  -0.01%  -0.42%  -0.04%   0.46%  -0.41%

 1981-1   0.02%  -0.20%   0.27%   1.08%  -0.19%   0.96%

 1985-1  -0.09%  -0.25%  -0.76%  -1.22%   0.96%  -1.35%

 1989-1  -1.07%   0.69%   0.84%  -0.06%  -0.02%   0.37%

 1993-1  -0.53%  -0.67%   0.24%  -0.09%   0.42%  -0.62%

 1997-1   0.57%   0.27%   0.50%   1.59%   1.11%   4.05%

   Avg:    -0.22%  -0.03%   0.22%   0.26%   0.46%   0.68%

 2001-1   0.51%   1.30%  -1.05%   0.55%  -0.94%   0.36%

 2005-1   0.12%  -0.02%  -0.22%   0.52%  -0.23%   0.18%

 2009-1  -0.10%   0.35%  -0.35%   0.61%   0.14%   0.65%

 2013-1  -0.03%  -1.02%  -0.84%   1.48%  -0.59%  -1.00%

 2017-1  -0.12%  -0.28%   0.16%   0.03%  -0.08%  -0.30%

   Avg:      0.08%   0.07%  -0.46%   0.64%  -0.34%  -0.02%

SPX Summary for PY1 1953 - 2017 

•  Avg:     -0.21%  -0.02%  -0.20%   0.32%   0.19%   0.07%
•  Win%:       29%     41%     41%     65%     59%     53%

SPX Summary for All Years 1953 - 2020

•  Avg:     -0.18%  -0.07%   0.04%   0.00%   0.14%  -0.06%
•  Win%:       47%     43%     48%     57%     59%     46%

Conclusion

Everything has been going in the right direction. The strongest sectors last week were energy and finance, while the weakest were precious metals and healthcare. I expect the major averages to be higher on Friday, June 11 than they were on Friday, June 4.