The good news is:

• The Dow Jones Industrial Average (DJIA) closed at an all time high last Friday and the S&P 500 (SPX) closet at an all time high last Thursday.

The Negatives

The market is overbought.

There are numerous non confirmations by the breadth indicators.

The first chart covers the past 6 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 1^st trading day of each month. 

OTC NH moved sharply upward last week, but is unlikely to confirm a new index high that should happen soon.

The next chart is similar to the first one except it shows the SPX in red and NY NH, in green, has been calculated with NYSE data.

NY NH failed to confirm the new SPX all time high by a wide margin.

The Positives

The breadth indicators have been moving sharply upward, however, they are a long way from confirming the new index highs.  This has been (is) a blue chip rally and is typical of a final cycle top.

The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL), in brown.  OTC NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good).

OTC NL has turned momentarily downward with every index pull back.  Fortunately the general direction for the past 2 weeks has been upward.

The next chart is similar to the one above except is shows the SPX in red and NY NL has been calculated with NYSE data.

NY NL has shown less hesitation on the pull backs.  All of the NYSE breadth indicators have been stronger than the NASDAQ breadth indicators. 

The next chart covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral level.

OTC HL Ratio continued to move further indo positive territory last week.

The next chart is similar to the previous one except it shows the SPX in red and NY HL ratio, in blue, has been calculated with NYSE data.

NY HL Ratio continued its move upward finishing the week at a strong 89%. 

Seasonality

Next week includes the last 5 trading days of October during the 1^st 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 1^st 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 modest, mixed and weaker during the 1^st year of the Presidential Cycle than other years, 

Report for the last 5 days of October.

The number following the year represents its position in the Presidential Cycle.

The number following the daily return represents the day of the week;

1 = Monday, 2 = Tuesday etc.


OTC Presidential Year 1 (PY1)

               Day5      Day4      Day3      Day2      Day1      Totals

 1965-1       0.31% 1  -0.56% 2   0.24% 3  -0.26% 4   0.55% 5     0.28%

 1969-1       0.35% 1   0.29% 2   0.08% 3   0.06% 4   0.79% 5     1.56%

 1973-1       0.16% 4   0.43% 5  -0.62% 1  -1.30% 2  -0.42% 3    -1.75%

 1977-1      -1.08% 2   0.03% 3   0.22% 4   0.43% 5   0.03% 1    -0.37%


 1981-1      -0.47% 1   0.84% 2   0.59% 3  -0.35% 4   1.12% 5     1.73%

 1985-1      -0.38% 5  -0.11% 1   0.67% 2   0.39% 3   0.10% 4     0.68%

 1989-1       0.26% 3  -1.02% 4  -1.18% 5  -0.31% 1   0.94% 2    -1.31%

 1993-1      -0.38% 1  -0.56% 2   0.84% 3   0.21% 4   0.75% 5     0.86%

 1997-1      -7.01% 1   4.24% 2   0.16% 3  -2.02% 4   1.48% 5    -3.16%


 Avg         -1.60%     0.68%     0.22%    -0.41%     0.88%      -0.24%


 2001-1       2.54% 4  -0.37% 5  -3.93% 1  -1.89% 2   1.37% 3    -2.28%

 2005-1      -0.30% 2  -0.45% 3  -1.73% 4   1.26% 5   1.46% 1     0.25%

 2009-1      -0.59% 1  -1.20% 2  -2.67% 3   1.84% 4  -2.50% 5    -5.12%

 2013-1       0.37% 5  -0.08% 1   0.31% 2  -0.55% 3  -0.28% 4    -0.23%

 2017-1      -0.52% 3  -0.11% 4   2.19% 5  -0.03% 1   0.43% 2     1.96%


 Avg          0.30%    -0.44%    -1.16%     0.13%     0.09%      -1.08%


OTC summary for PY1 1965 - 2017

Averages     -0.48%     0.10%    -0.34%    -0.18%     0.41%      -0.49%

% Winners       43%       36%       64%       43%       79%         50%

MDD  10/27/1997  7.01% --  10/30/2001  6.09% --  10/30/2009  5.08%


OTC summary for all years 1963 - 2020

Averages     -0.46%     0.19%    -0.13%     0.28%     0.39%       0.28%

% Winners       40%       43%       59%       55%       64%         53%

MDD 10/28/1987  11.13% --  10/31/1978  8.29% --  10/27/1997  7.01%


SPX PY1

               Day5      Day4      Day3      Day2      Day1      Totals

 1929-1      -0.69% 6 -12.34% 1 -10.16% 2  12.53% 3   5.05% 4    -5.61%

 1933-1      -1.97% 4   1.06% 5  -1.36% 6  -3.93% 1  -0.88% 2    -7.09%

 1937-1      -2.17% 2   0.17% 3   2.47% 4   2.49% 5   0.08% 6     3.04%


 1941-1      -1.23% 1  -0.10% 2  -0.31% 3   0.00% 4  -1.25% 5    -2.89%

 1945-1       0.49% 4   0.49% 5  -0.79% 1   0.12% 2   1.65% 3     1.96%

 1949-1       0.69% 3   0.56% 4  -0.43% 5   0.31% 6  -0.56% 1     0.57%

 1953-1      -0.16% 1  -0.21% 2   0.12% 3   1.19% 4  -0.16% 5     0.78%

 1957-1      -0.29% 5  -0.42% 1   0.67% 2   0.81% 3   0.10% 4     0.86%


 Avg         -0.10%     0.06%    -0.15%     0.49%    -0.04%       0.26%


 1961-1       0.53% 3   0.18% 4  -0.18% 5   0.12% 1   0.29% 2     0.94%

 1965-1      -0.34% 1   0.58% 2   0.34% 3  -0.32% 4   0.23% 5     0.48%

 1969-1      -0.18% 1  -0.29% 2  -0.87% 3   0.12% 4   0.32% 5    -0.90%

 1973-1       0.21% 4   0.80% 5  -0.21% 1  -1.64% 2  -0.95% 3    -1.79%

 1977-1      -0.69% 2   1.21% 3   0.26% 4   0.29% 5  -0.29% 1     0.78%


 Avg         -0.09%     0.49%    -0.13%    -0.29%    -0.08%      -0.10%


 1981-1      -0.37% 1   0.96% 2   0.13% 3  -0.33% 4   2.38% 5     2.77%

 1985-1      -0.52% 5   0.13% 1   0.78% 2   0.44% 3  -0.13% 4     0.70%

 1989-1      -0.35% 3  -1.33% 4  -0.85% 5   0.00% 1   1.58% 2    -0.95%

 1993-1       0.20% 1   0.02% 2   0.07% 3   0.67% 4   0.02% 5     0.98%

 1997-1      -6.87% 1   5.05% 2  -0.23% 3  -1.68% 4   1.21% 5    -2.52%


 Avg         -1.58%     0.96%    -0.02%    -0.18%     1.01%       0.20%


 2001-1       1.37% 4   0.41% 5  -2.38% 1  -1.72% 2   0.00% 3    -2.32%

 2005-1      -0.24% 2  -0.43% 3  -1.05% 4   1.65% 5   0.72% 1     0.66%

 2009-1      -1.17% 1  -0.33% 2  -1.95% 3   2.25% 4  -2.81% 5    -4.01%

 2013-1       0.44% 5   0.13% 1   0.56% 2  -0.49% 3  -0.38% 4     0.26%

 2017-1      -0.47% 3   0.13% 4   0.81% 5  -0.32% 1   0.09% 2     0.24%


 Avg         -0.01%    -0.02%    -0.80%     0.28%    -0.48%      -1.03%


SPX summary for PY1 1929 - 2017

Averages     -0.60%    -0.16%    -0.63%     0.55%     0.27%      -0.57%

% Winners       30%       65%       43%       61%       57%         61%

MDD  10/29/1929  21.78% --  10/31/1933  6.96% --  10/27/1997  6.87%


SPX summary for all years 1928 - 2020

Averages     -0.48%     0.12%    -0.07%     0.39%     0.20%       0.15%

% Winners       35%       59%       52%       57%       56%         56%

MDD 10/29/1929  21.78% --  10/26/1987  8.28% --  10/31/1933  6.96%

Conclusion

The rapid rise of the blue chip indices to all time highs is typical of a final cycle top.  There is probably a little left to the upside, but the end is near.

The strongest sectors last week were Precious Metals and Banks while the weakest were Leisure and Telecomm.

I expect the major averages to be higher on Friday October 29 than they were on Friday October 22.