Technical Market Report for Saturday, Sept. 11, 2021

The good news is that, despite how the market had a rough week as measured by prices, new lows remained minimal.  

The Negatives

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 turned down with prices.

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

Minimal new lows imply narrowing leadership. That is not good.

The Positives

New lows remained at low levels while prices fell last week. The market is a little oversold.

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 its recovery as prices fell.

The next chart is similar to the one above, except is shows the SPX in red and the NY NL in blue. The NY NL information has been calculated with NYSE data. Similar action was seen in the NY NL.

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 fell, but remained in comfortably positive territory.

The next chart is similar to the previous one, except it shows the SPX in red and the NY HL Ratio in blue. The NY HL Ration information has been calculated with NYSE data. The NY HL Ratio also held up well. 

Seasonality

Next week includes the five trading days prior to the third Friday of September 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. Prior to 1953 the market traded six days a week, so that data has been ignored.

Average returns for the coming week have been positive by all measures. 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   0.51%   0.32%  -0.19%   0.38%   0.70%   1.72%

 1969-1   0.25%   1.42%   0.67%   0.26%   0.18%   2.79%

 1973-1   0.19%   0.03%   1.51%   0.79%   0.64%   3.16%

 1977-1  -0.31%  -0.14%   0.15%   0.36%  -0.23%  -0.17%

 1981-1  -0.10%  -0.03%  -0.92%  -1.12%  -0.78%  -2.95%

 1985-1  -0.64%  -1.51%  -0.01%   0.91%   0.27%  -0.98%

 1989-1  -0.19%   0.31%  -0.01%  -0.65%  -0.26%  -0.79%

 1993-1  -0.54%  -1.04%   0.94%   0.03%   0.04%  -0.55%

 1997-1  -0.87%   2.06%  -0.13%   0.22%   0.61%   1.90%

   Avg:    -0.47%  -0.04%  -0.02%  -0.12%  -0.02%  -0.68%

 2001-1   5.35%   0.15%  -2.50%  -0.23%   2.61%   5.38%

 2005-1   0.34%  -0.51%  -1.03%  -0.15%   0.66%  -0.69%

 2009-1   0.52%   0.52%   1.45%  -0.30%   0.29%   2.48%

 2013-1  -0.12%   0.75%   1.01%   0.15%  -0.39%   1.41%

 2017-1   1.13%   0.34%   0.09%  -0.48%   0.30%   1.38%

   Avg:     1.45%   0.25%  -0.20%  -0.20%   0.69%   1.99%

OTC Summary for PY1 1965 - 2017 

•  Avg:      0.40%   0.19%   0.07%   0.01%   0.33%   1.01%
•  Win%:       50%     64%     50%     57%     71%     57%

OTC Summary for All Years 1963 - 2020

•  Avg:      0.07%   0.22%   0.02%   0.19%   0.25%   0.75%
•  Win%:       45%     59%     60%     64%     66%     62%

SPX PY1

   Year        Mon      Tue      Wed      Thur      Fri      Totals

 1953-1  -1.86%   0.84%   0.48%   0.26%  -0.52%  -0.80%

 1957-1  -0.49%   0.13%   0.11%  -0.65%  -1.60%  -2.49%

 1961-1  -0.88%   1.01%   0.07%  -0.71%   0.18%  -0.33%

 1965-1   0.29%  -0.39%   0.55%   0.56%   0.03%   1.04%

 1969-1   0.55%   0.08%  -0.34%   0.29%   0.31%   0.89%

 1973-1  -0.28%  -0.36%   2.03%   0.83%   0.41%   2.63%

 1977-1  -0.35%   0.06%   0.48%   0.26%  -0.33%   0.12%

   Avg:    -0.13%   0.08%   0.56%   0.25%   0.12%   0.87%

 1981-1  -0.78%  -0.74%  -0.75%  -1.45%  -0.76%  -4.48%

 1985-1  -0.02%  -0.83%   0.19%   0.92%  -0.73%  -0.46%

 1989-1  -0.32%   0.30%  -0.93%  -0.67%   0.55%  -1.06%

 1993-1   0.07%  -0.47%   0.37%  -0.47%  -0.13%  -0.62%

 1997-1  -0.45%   2.81%  -0.28%   0.45%   0.34%   2.88%

   Avg:    -0.30%   0.22%  -0.28%  -0.24%  -0.15%  -0.75%

 2001-1   3.90%   0.88%  -0.52%   1.15%   2.19%   7.60%

 2005-1  -0.07%  -0.75%  -0.33%   0.05%   0.83%  -0.28%

 2009-1   0.63%   0.31%   1.53%  -0.31%   0.26%   2.44%

 2013-1   0.57%   0.42%   1.22%  -0.18%  -0.72%   1.30%

 2017-1   1.08%   0.34%   0.08%  -0.11%   0.18%   1.57%

   Avg:     1.22%   0.24%   0.40%   0.12%   0.55%   2.53%

SPX Summary for PY1 1953 - 2017 

•  Avg:      0.09%   0.21%   0.23%   0.01%   0.03%   0.59%
•  Win%:       41%     65%     65%     53%     59%     53%

SPX Summary for All Years 1953 - 2020

•  Avg:      0.11%   0.14%   0.09%   0.16%   0.11%   0.60%
•  Win%:       51%     57%     64%     56%     54%     62%

Conclusion

The market is oversold as it moves into a seasonally positive week. The strongest sectors last week were electronics and healthcare, while the weakest were banks and precious metals (down from the top last week).

I expect the major averages to be higher on Friday, Sept. 17 than they were on Friday, Sept. 10.