Technical Market Report for Saturday, Sept. 25, 2021

The good news is that the market had a pretty good week after its Evergrande tantrum on Monday. All of the major indices were up at the end of the week.

The Negatives

Breadth has left something to be desired. It has been bad, but not awful.

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 continued its fall.

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.

Leadership continues to narrow.

The Positives

New lows, like everything else, had a bad day last Monday and spent the rest of the week recovering.

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’s recovery began after Monday.

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 managed to finish the week in 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 recovered to positive territory after Monday. 

Seasonality

Next week includes the last four trading days of September and the first trading day of October, 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 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 mixed and stronger during the first year of the Presidential Cycle than other years. 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)

   Year           Day 5       Day 4       Day 3       Day 2       Day 1      Totals

 1965-1       0.09% 1   0.19% 2   0.07% 3  -0.88% 4  -0.06% 5    -0.58%

 1969-1      -0.17% 4  -0.27% 5  -0.36% 1  -0.39% 2   0.42% 3    -0.78%

 1973-1       0.10% 2   0.75% 3   0.59% 4  -0.06% 5  -0.21% 1     1.16%

 1977-1       0.00% 2   0.22% 3   0.31% 4   0.58% 5   0.31% 1     1.42%

 1981-1      -2.92% 5  -0.05% 1   1.99% 2   0.85% 3   0.59% 4     0.46%

 1985-1      -0.69% 2  -0.81% 3  -0.57% 4   0.05% 1   0.51% 2    -1.51%

 1989-1       0.24% 2  -0.01% 3   0.72% 4   0.38% 5   0.48% 1     1.81%

 1993-1       0.70% 1   0.49% 2  -0.06% 3  -0.05% 4   0.06% 5     1.13%

 1997-1      -0.50% 4   0.20% 5   0.70% 1  -0.48% 2   0.27% 3     0.18%

   Avg:         -0.63%    -0.04%     0.55%     0.15%     0.38%       0.41%

 2001-1       0.15% 2  -2.50% 3  -0.23% 4   2.61% 5  -1.22% 1    -1.20%

 2005-1      -0.24% 2  -0.05% 3   1.22% 4   0.49% 5   0.17% 1     1.60%

 2009-1      -0.79% 5   1.90% 1  -0.31% 2  -0.08% 3  -3.06% 4    -2.34%

 2013-1      -0.19% 3   0.70% 4  -0.15% 5  -0.27% 1   1.23% 2     1.32%

 2017-1       0.15% 2   1.14% 3   0.00% 4   0.66% 5   0.32% 1     2.27%

   Avg:         -0.18%     0.24%     0.11%     0.68%    -0.51%       0.33%

OTC Summary for PY1 1965 - 2017

• Averages:     -0.29%     0.13%     0.28%     0.24%    -0.01%       0.35%
• % Winners:       43%       57%       57%       50%       71%         64%
• MDD:  10/1/2009:  3.44% --  9/28/1981:  2.97% --  9/27/2001:  2.73%

OTC Summary for All Years 1963 - 2020

• Averages:      0.00%    -0.14%    -0.17%     0.01%    -0.09%      -0.38%
• % Winners:       53%       48%       44%       50%       51%         50%
• MDD: 9/29/2008:  9.28% --  10/3/2011:  8.28% --  10/1/1998:  7.53%

SPX PY1

    Year         Day 5       Day 4       Day 3       Day 2       Day 1       Totals

 1929-1       0.91% 4  -2.76% 5   0.56% 6  -0.92% 1  -0.60% 2    -2.81%

 1933-1      -4.17% 3   1.45% 4  -0.72% 5   1.13% 6  -2.14% 1    -4.44%

 1937-1       4.13% 1   0.66% 2   0.51% 3  -0.22% 4  -0.29% 5     4.79%

 1941-1      -0.30% 5   0.40% 6   0.00% 1   0.69% 2  -0.29% 3     0.50%

 1945-1      -0.06% 3  -0.38% 4   1.20% 5   0.69% 6   1.05% 1     2.50%

 1949-1      -0.77% 2   0.78% 3   0.58% 4  -0.26% 5  -0.39% 6    -0.06%

 1953-1       0.26% 5   0.64% 1   0.17% 2  -0.60% 3   0.60% 4     1.08%

 1957-1      -1.21% 3   0.26% 4  -0.05% 5  -0.31% 1   0.80% 2    -0.50%

   Avg:         -0.42%     0.34%     0.38%     0.04%     0.35%       0.70%

 1961-1       0.02% 2   1.05% 3   0.17% 4   0.23% 5   0.06% 1     1.51%

 1965-1       0.70% 1  -0.24% 2  -0.45% 3  -0.07% 4  -0.07% 5    -0.13%

 1969-1      -0.76% 4  -0.64% 5  -0.80% 1  -0.31% 2  -0.64% 3    -3.16%

 1973-1       0.64% 2   0.72% 3   0.23% 4  -0.60% 5  -0.20% 1     0.80%

 1977-1      -0.15% 2   0.07% 3   0.57% 4   0.71% 5   0.22% 1     1.42%

   Avg:          0.09%     0.19%    -0.06%    -0.01%    -0.13%       0.09%

 1981-1      -1.95% 5   2.45% 1   0.35% 2   0.21% 3   0.77% 4     1.84%

 1985-1      -0.91% 2  -1.07% 3   0.35% 4   0.44% 1   1.64% 2     0.44%

 1989-1       0.03% 2   0.22% 3   1.01% 4   0.16% 5   0.49% 1     1.92%

 1993-1       0.91% 1  -0.06% 2  -0.31% 3  -0.26% 4   0.51% 5     0.80%

 1997-1      -0.70% 4   0.78% 5   0.86% 1  -0.64% 2   0.86% 3     1.16%

   Avg:         -0.52%     0.46%     0.45%    -0.02%     0.86%       1.23%

 2001-1       0.88% 2  -0.52% 3   1.15% 4   2.19% 5  -0.23% 1     3.47%

 2005-1       0.00% 2   0.10% 3   0.89% 4   0.09% 5  -0.17% 1     0.91%

 2009-1      -0.61% 5   1.78% 1  -0.22% 2  -0.33% 3  -2.58% 4    -1.96%

 2013-1      -0.27% 3   0.35% 4  -0.41% 5  -0.60% 1   0.80% 2    -0.14%

 2017-1       0.01% 2   0.41% 3   0.12% 4   0.37% 5   0.39% 1     1.29%

   Avg:          0.00%     0.42%     0.31%     0.34%    -0.36%       0.72%

SPX Summary for PY1 1929 - 2017

• Averages:     -0.15%     0.28%     0.25%     0.08%     0.03%       0.49%
• % Winners:       48%       70%       65%       48%       52%         65%
• MDD:  10/2/1933:  4.47% --  10/1/1929:  3.69% --  10/1/1969:  3.12%

SPX Summary for All Years 1928 - 2020

• Averages:     -0.08%     0.08%    -0.22%     0.01%     0.05%      -0.16%
• % Winners:       47%       57%       52%       47%       51%         54%
• MDD: 10/1/1931:  12.73% --  9/29/2008:  8.79% --  10/1/1974:  6.81%

October

Since 1963, over all years, the OTC in October has been up 55% of the time with an average gain of 0.8%. During the first year of the Presidential Cycle, October has been up 57% time with an average gain of 2.3% (helped considerably by an 11.7% gain in 1969 and a 12.8% gain in 2001). The best October ever for the OTC was 1974 (+17.2%), while the worst was 1987 (-27.2%).

The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the first 11 trading days and each of the last 10. 

In months where there were more than 21 trading days, some of the days in the middle were not counted. In months where there were less than 21 trading days, some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the first trading day and at five trading day intervals after that. The line is solid on the eleventh trading day, the dividing point.

In the chart below, the blue line shows the average of the OTC in October over all years since 1963, while the green line shows the average during the first year of the Presidential Cycle over the same period.

Since 1928, the SPX has been up 58% of the time in October with an average gain of 0.4%. During the first year of the Presidential Cycle, the SPX has been up 52% of the time with an average loss of -1.0%. The best October ever for the SPX was 1974 (+16.3%), while the worst was 1987 (-21.8%).

The chart below is similar to the one above, except it shows the average daily performance over all years for the SPX in October in red, and the performance during the first year of the Presidential Cycle in green.

Since 1979, the Russell 2000 (R2K) has been up 57% of the time in October with an average loss of -0.4%. During the first year of the Presidential Cycle, the R2K has been up 60% of the time with an average gain of 0.3%. The best October ever for the R2K was 2011 (+15.0%), while the worst was 1987 (-30.7%).

The chart below is similar to those above, except it shows the daily performance over all years of the R2K in October in magenta, and the performance during the first year of the Presidential Cycle in green.

Since 1885, the DJIA has been up 56% of the time in October with an average gain of 0.3%. During the first year of the Presidential Cycle, the DJIA has been up 56% of the time in October with an average loss of -0.4%. The best October ever for the DJIA was 1885 (+12.3%), while the worst was 1987 (-23.2%).

The chart below is similar to those above, except it shows the daily performance over all years of the DJIA in October in grey, and the performance during the first year of the Presidential Cycle in green.

Conclusion

The market recovered after Monday's events and finished higher for the week. The strongest sectors last week were banks and retail, while the weakest were precious metals and utilities (same as last week). I expect the major averages to be higher on Friday, Oct. 1 than they were on Friday, Sept. 24.