The good news is:​ There should be some seasonal relief next week.

The Negatives

I think the Plunge Protection Team (PPT) AKA, “The President's Working Group on Financial Markets”, has been busy. Their strategy appears to be to limit daily declines of the blue chip indices to the low 2% range. The number of new lows suggests a high likelihood of a crash yet all we have seen are around 2% daily drops on the DJIA and S&P 500 (SPX).

The first chart covers the past 6 months showing the SPX in red and a 40% trend (4 day EMA) of NYSE new highs divided by new highs + new lows (NY HL Ratio), in blue. Dashed vertical lines have been drawn on the first trading day of each month. Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

 NY HL Ratio at 0.9% does not have much room on the downside. 

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

OTC HL Ratio at 1.3% also has little room on the downside.

On Thursday 42% of issues traded on the NYSE hit new lows while 37% of issues traded on the Nasdaq hit new lows.

The next chart covers the past 6 months showing the OTC in blue and a 10% trend of Nasdaq new lows (OTC NL) in brown.  OTC NL has been plotted on an inverted Y axis so diminishing numbers of new lows move the indicator upward (up is good).

OTC NL is at its lowest point since October 2008.

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.

NY NL is also at its lowest point since October 2008.

It is rare for the number of new lows to be anywhere near these levels.

The Positives

Seasonally the market in the coming week usually goes nowhere on the lowest volume of the year. That would be a relief.

Seasonality
Next week includes the 5 trading days prior to the 4th Friday of December 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 2018 while SPX data runs from 1953 to 2018. 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 modest and a little weaker during the 2nd year of the Presidential Cycle than other years.

Report for the week before the 4th Friday of December.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1966-2   0.18%  -0.38%   0.47%   0.84%   0.34%   1.46%
 1970-2   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 1974-2  -1.38%   0.76%   0.00%   0.99%  -0.24%   0.14%

 1978-2  -2.62%   0.35%   0.52%   0.45%   0.93%  -0.37%
 1982-2   0.37%  -0.43%   0.03%  -0.43%   0.49%   0.04%
 1986-2  -0.27%  -0.72%   0.25%   0.00%   0.11%  -0.63%
 1990-2  -0.32%   0.00%   0.00%  -0.36%   0.04%  -0.64%
 1994-2  -0.16%   0.09%   1.22%   0.26%   0.39%   1.79%

 Avg     -0.60%  -0.18%   0.40%  -0.02%   0.39%   0.04%

 1998-2   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 2002-2   1.37%  -0.67%   0.00%  -0.33%  -1.43%  -1.07%
 2006-2  -0.88%  -0.25%  -0.08%  -0.48%  -0.61%  -2.30%
 2010-2   0.06%  -0.16%   0.15%  -0.15%  -0.38%  -0.48%
 2014-2   0.34%  -0.33%   0.17%   0.00%   0.70%   0.87%

 Avg      0.22%  -0.35%   0.08%  -0.32%  -0.43%  -0.74%

OTC summary for Presidential Year 2 1966 - 2014 
 Avg     -0.30%  -0.17%   0.30%   0.09%   0.03%  -0.11%
 Win%       45%     30%     78%     44%     64%     45%

OTC summary for all years 1963 - 2017
 Avg     -0.25%  -0.03%  -0.01%   0.22%   0.44%   0.34%
 Win%       43%     43%     59%     64%     74%     62%


SPX Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1954-2  -0.85%   1.03%   0.87%   0.00%   0.67%   1.72%

 1958-2   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 1962-2  -0.02%   0.00%   0.62%  -0.14%   0.05%   0.51%
 1966-2  -0.38%  -0.38%   0.52%   0.38%  -0.27%  -0.13%
 1970-2   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 1974-2  -1.42%   1.39%   0.00%   0.84%  -0.44%   0.37%

 Avg     -0.61%   0.51%   0.57%   0.36%  -0.22%   0.25%

 1978-2  -1.98%   0.86%   0.47%   0.03%   1.69%   1.06%
 1982-2   1.76%  -0.99%   0.33%  -0.64%   0.22%   0.68%
 1986-2  -0.39%  -0.97%   0.17%   0.00%   0.07%  -1.13%
 1990-2  -0.56%   0.00%   0.29%  -0.77%   0.13%  -0.91%
 1994-2  -0.19%  -0.18%   0.55%   0.02%   0.03%   0.23%

 Avg     -0.27%  -0.32%   0.36%  -0.34%   0.43%  -0.01%

 1998-2   0.00%   0.00%   0.00%   0.00%   0.00%   0.00%
 2002-2   0.18%  -0.55%   0.00%  -0.31%  -1.60%  -2.28%
 2006-2  -0.32%   0.22%  -0.14%  -0.37%  -0.53%  -1.15%
 2010-2   0.06%   0.08%   0.10%  -0.15%   0.07%   0.16%
 2014-2   0.38%   0.17%  -0.01%   0.00%   0.33%   0.87%

 Avg      0.08%  -0.02%  -0.02%  -0.28%  -0.43%  -0.60%

SPX summary for Presidential Year 2 1954 - 2014 
 Avg     -0.29%   0.06%   0.34%  -0.11%   0.03%   0.00%
 Win%       31%     55%     82%     40%     69%     62%

SPX summary for all years 1953 - 2018
 Avg     -0.16%   0.02%   0.19%   0.16%   0.22%   0.38%
 Win%       37%     49%     64%     60%     72%     69%

Money supply (M2) and Interest Rates

The following charts were supplied by Gordon Harms.
M2 growth jumped up a little in the past month. 

There is only a 0.4% difference in yield of the 2yr and 30yr.

Conclusion

The extreme number of new lows implies more on the downside. We may get some relief next week because all of the big money traders should be out of town.

I expect the major averages to be lower on Friday December 28 than they were on Friday December 21.