Technical Market Report For Saturday, May 1

Technical market report for Saturday, May 1, 2021

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

The Negatives

Although new highs have remained at comfortably high levels, they have failed to confirm the new price records.

The first chart covers the past six months, showing the SPX in red and a 10% trend (19-day EMA) of NYSE new highs (NY NH) in green. Dashed vertical lines have been drawn on the first trading day of each month. The NY NH came pretty close, but failed to confirm the recent index high.

The next chart is similar to the first one, except it shows the OTC in blue and the OTC NH in green. The information has been calculated with Nasdaq data. The OTC NH seriously failed to confirm Monday’s record high.

The next chart covers the past six months, showing the OTC in blue and a 10% trend (19-day EMA) of Nasdaq new lows (OTC NL) in brown. The OTC NL has been plotted on an inverted Y axis, so decreasing numbers of new lows move the indicator upward (up is good). The OTC NL continued to recover, but at 57 the value is still uncomfortably high.

The Positives

New all-time highs are a positive, but at the end of the week, not much had changed.

The next chart is similar to the previous one, except it shows the SPX in red and the NY NL in blue. The information has been calculated with NYSE data. I consider this one a positive because the level of the indicator (24), up a little from last week, is not threatening.

The next chart covers the past six months, showing the SPX in red, and a 40% trend (four-day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio) in blue. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level.

The NY HL Ratio took a little dip last week, but finished the week at a very strong at 93%. Sometimes price action can be confusing. This indicator is not predictive, but it offers a pretty good representation of what is really going on in the market. 

The next chart is similar to the one above, except it shows the OTC in blue and the OTC HL Ratio in red. The information has been calculated with Nasdaq data. The OTC HL Ratio jumped up, finishing the week at a comfortable 79%.

Seasonality

Next week includes the first five trading days of May 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 1928 to 2020. There are summaries for both the first year of the Presidential Cycle and all years combined. Average returns for the coming week have been positive by all measures and much stronger during the first year of the Presidential Cycle than other years.

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