The good news is:

• Seasonally, this negative period ends in a few weeks.

The Negatives

New lows increased to crashworthy numbers last week.

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 (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH continued declining as prices fell 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 declining 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 turned downward moving into very 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 resumed its downward move. 

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

Positives are pretty hard to fine; the FOMC is expected to raise interest rates next Wednesday.

Seasonality

Next week includes the 5 trading days prior to the 4th 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 negative by all measures.

Report for the week before the 4th Friday of September.

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

Daily returns from Monday through the 4th Friday.

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.

The first chart covers the past 5 years showing the SPX in red and M2 money supply in green.

Treasury rates at their close last Friday and their changes from last month:

• 2yr yield 3.867% up from 3.257%
• 5yr yield 3.638% up from 2.976%
• 10yr yield 3.453% up from 2.838% 
• 30yr yield 3.518% up from 3.114%

The 2 is inverted to (higher than) everything.

The 5 is inverted to the 10.

A pretty ugly picture.

The next chart covers the past 3 years showing the 30 year yield over the 5 year yield on top, The 1, 2, 5, 10 & 30 year treasury rates in the middle group and the SPX with a 50 day simple moving average on the bottom.

Conclusion

Equities took a hit last week and the FOMC is likely to announce another rate increase on Wednesday.  There is not much to be positive about.

The strongest sectors last week were Banks and Health care while the weakest were Electronics and Basic Materials.

I expect the major averages to be lower on Friday, September 23 than they were on Friday, September 16.

More By This Author:

Technical Market Report For September 10, 2022
Technical Market Report For September 3, 2022
Technical Market Report For August 27, 2022