The good news is:

• The market had a good week led by the small caps.

 

The Negatives

For the first time since August 25, new highs outnumbered new lows on the NYSE last Friday.  August 25 was the day before the market began a 7 day decline.

The first chart covers the last 6 months showing the Nasdaq composite (OTC) in blue and a 10% trend (19 day EMA) of Nasdaq new highs in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH continued declining as prices rose last week.

 

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH has been calculated with NYSE data.

NY NH continued its decline from a very low level.

 

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 (equal numbers of new highs and new lows).

OTC HL Ratio rose, but remained in negative territory. 

 

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 ditto,

 

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

NY NL turned modestly upward; not the sharp move you get when the market is changing direction. 

 

The next chart is similar to the previous one except it shows the OTC in blue and OTC NL, in brown, has been calculated with Nasdaq data.

OTC NL ditto.  

 

The Positives

The market had a relief rally last week; similar to the one that ended August 25.

Seasonality

Next week includes the 5 trading days prior to the 3rd Friday of September during the 2nd 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 2021 while SPX data runs from 1953 to 2021.  There are summaries for both the 2nd 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 modestly positive by all measures.

 

Report for the week before the 3rd Friday of September.

The number following the year is the position in the Presidential Cycle.

Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2 (PY2)

Year       Mon     Tue     Wed    Thur    Fri    Totals

1966-2  -0.08%   1.31%   0.15%   0.91%   0.63%   2.93%

1970-2   0.09%  -0.13%  -1.14%   0.20%   1.15%   0.18%

1974-2   1.02%   0.84%   0.69%   2.41%   0.64%   5.60%

1978-2   0.43%   0.21%   0.01%  -0.65%  -0.71%  -0.72%

1982-2   0.24%   0.93%   0.93%   0.26%  -0.10%   2.25%

1986-2  -0.27%  -0.63%   0.94%   0.49%   0.24%   0.77%

1990-2  -0.08%  -0.51%  -0.14%  -1.95%  -0.60%  -3.28%

1994-2  -0.49%   0.77%   0.36%   1.31%  -0.10%   1.85%

1998-2   1.47%   0.72%   0.73%  -2.58%   1.06%   1.40%

Avg      0.17%   0.25%   0.56%  -0.49%   0.10%   0.60%

2002-2  -1.20%  -1.25%  -0.62%  -2.85%   0.38%  -5.54%

2006-2   0.34%   1.96%   0.53%   0.05%   0.31%   3.19%

2010-2   1.93%   0.18%   0.50%   0.08%   0.54%   3.23%

2014-2  -1.07%   0.75%   0.21%   0.68%  -0.30%   0.28%

2018-2  -1.43%   0.76%  -0.08%   0.98%  -0.51%  -0.27%

Avg     -0.28%   0.48%   0.11%  -0.21%   0.08%   0.18%

OTC summary for PY2 1966 - 2018

Avg      0.06%   0.42%   0.22%  -0.05%   0.19%   0.85%

Win%       50%     71%     71%     71%     57%     71%

OTC summary for all years 1963 - 2021

Avg      0.06%   0.21%   0.03%   0.19%   0.23%   0.73%

Win%       44%     58%     60%     64%     64%     61%

SPX PY2

Year       Mon     Tue     Wed    Thur    Fri    Totals

1954-2   0.91%   0.51%   0.03%   0.54%   0.79%   2.79%

1958-2   0.89%   0.80%  -0.04%  -0.51%   0.65%   1.79%

1962-2   0.32%  -0.08%  -0.14%  -0.70%  -1.45%  -2.05%

1966-2   2.12%   0.53%   1.03%   1.20%  -0.11%   4.77%

1970-2  -0.55%  -0.87%   0.53%   0.61%   0.40%   0.13%

1974-2   1.63%   1.69%   0.50%   3.50%   0.07%   7.39%

1978-2   0.18%   0.01%  -0.61%  -1.17%  -0.93%  -2.52%

Avg      0.74%   0.26%   0.26%   0.69%  -0.40%   1.55%

1982-2   1.05%   0.70%   0.97%  -0.42%  -0.99%   1.32%

1986-2   0.55%  -0.09%  -0.02%   0.27%  -0.04%   0.67%

1990-2   0.30%   0.26%  -0.63%  -1.62%  -0.05%  -1.74%

1994-2  -0.42%   0.28%   0.27%   1.28%  -0.76%   0.65%

1998-2   2.04%   0.78%   0.75%  -2.54%   0.12%   1.14%

Avg      0.70%   0.39%   0.27%  -0.61%  -0.34%   0.41%

2002-2   0.14%  -1.97%  -0.46%  -3.01%   0.25%  -5.05%

2006-2   0.05%   1.04%   0.38%  -0.14%   0.27%   1.61%

2010-2   1.11%  -0.07%   0.35%  -0.04%   0.08%   1.44%

2014-2  -0.07%   0.75%   0.13%   0.49%  -0.05%   1.25%

2018-2  -0.56%   0.54%   0.13%   0.78%  -0.04%   0.85%

Avg      0.14%   0.06%   0.10%  -0.38%   0.10%   0.02%

SPX summary for PY2 1954 - 2018

Avg      0.57%   0.28%   0.19%  -0.08%  -0.11%   0.85%

Win%       76%     71%     65%     47%     47%     76%

SPX summary for all years 1953 - 2021

Avg      0.11%   0.13%   0.10%   0.15%   0.09%   0.58%

Win%       52%     57%     65%     55%     54%     61%

 

Conclusion

Last week’s rally looks a lot like the previous one that ended August 25.

The strongest sectors last week were Utilities and Precious Metals while the weakest were Electronics and Telecomm.

I expect the major averages to be lower on Friday, September 16 than they were on Friday, September 9.

 

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