The good news is:

• The market appears to have put in a short term bottom.

The Negatives

Last week’s positives have become this week’s negatives and visa versa.

The first chart covers the last 6 months showing the S&P 500 (SPX) in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

NY NH confirmed the recent high.  That confirmation implies there should be another higher high for the SPX in the next couple months.  However, the indicator has fallen so far that it is unlikely to confirm a new index high anytime soon.

The next chart is similar to the one above except it shows the Nasdaq composite (OTC) in blue and OTC NH, in green, has been calculated with Nasdaq data.

OTC NH Ditto the OTC.

The Positives

Summation indices are running totals of oscillator values.

Short term momentum indicators applied to summation indices make them binary so direction is less important than position.

The first chart covers the past 6 months showing the SPX in red and momentum of summation indices of oscillators of advancing and declining issues, new highs and new lows and upside and downside volume on the NYSE.  

NYSE SI’s all turned upward last week.

The next chart is similar to the one above, except it shows the OTC, in blue, as the index and the SI’s have been generated from Nasdaq data.  

Ditto Nasdaq SI’s

The next chart covers the last 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 turned upward last week.

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

Ditto NY NL.

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 moved sharply upward last week; finishing the week a little short of the neutral line. 

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

NY HL ratio moved into solidly positive territory. 

Seasonality

Next week includes the 4 trading days prior to the 2nd Friday day of September during the 3rd 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 2022 while SPX data runs from 1953 to 2022.  There are summaries for both the 3rd 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 mixed, modest and stronger during the 3rd year of the Presidential Cycle than other years. 

Report for the week before the 2nd Friday of September

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

Daily returns from Monday to 2nd Friday.


Presidential Year 3 (PY3)

 Year       Mon     Tue       Wed     Thur      Fri      Totals

 1963-3  -0.06%  -0.17%   0.39%  -0.06%  -0.14%  -0.03%

 1967-3   0.00%   0.51%   0.12%   0.30%   0.15%   1.08%

 1971-3   0.00%   0.50%   0.05%  -0.03%  -0.12%   0.40%

 1975-3  -0.41%  -1.11%  -1.78%  -0.52%  -0.17%  -3.99%

 1979-3   0.57%  -0.35%   0.18%   0.45%   0.82%   1.67%


 Avg      0.03%  -0.12%  -0.21%   0.03%   0.11%  -0.17%


 1983-3   0.00%   1.13%  -0.16%   0.34%   0.15%   1.47%

 1987-3   0.00%  -1.99%   0.36%   0.98%   0.61%  -0.04%

 1991-3   0.22%  -1.31%   0.68%   1.24%  -0.85%  -0.02%

 1995-3   0.00%   1.94%   0.48%   0.65%   0.85%   3.92%

 1999-3   0.00%  -0.12%  -1.10%   1.54%   1.23%   1.56%


 Avg      0.22%  -0.07%   0.05%   0.95%   0.40%   1.38%


 2003-3   1.63%  -0.80%  -2.65%   1.22%   0.48%  -0.11%

 2007-3  -0.26%   1.50%  -0.21%   0.35%   0.04%   1.42%

 2011-3   0.00%  -0.26%   3.04%  -0.78%  -2.42%  -0.42%

 2015-3   0.00%   2.73%  -1.15%   0.84%   0.54%   2.96%

 2019-3  -0.19%  -0.04%   1.06%   0.30%  -0.22%   0.91%


 Avg      0.40%   0.63%   0.02%   0.39%  -0.31%   0.95%


OTC summary for PY3 1963 - 2019 

 Avg      0.21%   0.14%  -0.04%   0.46%   0.06%   0.72%

 Win%       43%     40%     60%     73%     60%     60%


OTC summeay for all years 1963 - 2022

 Avg     -0.29%  -0.06%  -0.01%   0.06%   0.04%  -0.09%

 Win%       48%     50%     56%     63%     55%     58%


SPX PY3

 Year       Mon     Tue     Wed    Thur    Fri    Totals

 1955-3   0.00%   0.60%  -0.02%   0.07%   0.02%   0.66%

 1959-3   0.00%  -1.43%  -0.71%  -0.52%   0.74%  -1.93%


 1963-3  -0.36%   0.56%   0.29%  -0.07%   0.03%   0.45%

 1967-3   0.00%   0.57%   0.19%  -0.06%   0.03%   0.73%

 1971-3   0.00%   0.46%   0.19%  -0.53%  -0.38%  -0.27%

 1975-3   0.32%  -1.50%  -0.96%  -0.41%  -0.18%  -2.73%

 1979-3   0.47%  -0.61%   0.29%   0.03%   0.84%   1.02%


 Avg      0.14%  -0.10%   0.00%  -0.21%   0.07%  -0.16%


 1983-3   0.00%   1.75%   0.04%  -0.11%  -0.51%   1.17%

 1987-3   0.00%  -0.99%   0.11%   1.02%   1.53%   1.68%

 1991-3  -0.14%  -1.03%   0.14%   0.58%  -0.97%  -1.41%

 1995-3   0.00%   0.95%   0.18%   0.02%   0.42%   1.56%

 1999-3   0.00%  -0.50%  -0.47%   0.26%   0.30%  -0.41%


 Avg     -0.14%   0.03%   0.00%   0.36%   0.15%   0.52%


 2003-3   1.00%  -0.82%  -1.20%   0.54%   0.22%  -0.25%

 2007-3  -0.13%   1.36%   0.00%   0.84%   0.02%   2.10%

 2011-3   0.00%  -0.74%   2.86%  -1.06%  -2.67%  -1.61%

 2015-3   0.00%   2.51%  -1.39%   0.53%   0.45%   2.10%

 2019-3  -0.01%   0.03%   0.72%   0.29%  -0.07%   0.96%


 Avg      0.29%   0.47%   0.20%   0.23%  -0.41%   0.66%


SPX summary for PY3 1955 - 2019 

 Avg      0.17%   0.07%   0.02%   0.08%  -0.01%   0.22%

 Win%       43%     53%     65%     59%     65%     59%


SPX summary for all years 1953 - 2022

 Avg     -0.24%  -0.05%   0.02%  -0.15%   0.04%  -0.24%

 Win%       45%     51%     58%     49%     61%     51%

Conclusion

The breadth indicators all turned upward.

Seasonality is modestly positive for the coming week and until mid September..

The strongest sectors last week were Energy and Basic materials (up from the bottom last week) while the weakest were Biotech and Utilities.

I expect the major averages to be higher on Friday September 8 than they were on Friday September 1. 

Last week’s negative forecast was a miss.

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