The good news is:​

Seasonally this rally has another week to go.

​The Negatives

New lows increased Friday which was an up day for all of the major averages.

The first chart covers the past 6 months showing the S&P 500 (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 the 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 is not closely following the sharp upward movement in prices. 

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

OTC HL Ratio in only slightly better than NY HL Ratio.

The Positives

Seasonality remains positive for another week.

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).

This is not the best looking chart. During the rally at the end of October, OTC NL moved sharply upward. During last weeks strong rally in prices, OTC NL was lacking, but it did move upward.

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.

Prices moved strongly upward while NY NL was nearly flat.

Seasonality

Next week includes the first 5 trading days 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 1928 to 2018. There are summaries for both the 2nd year of the Presidential Cycle and all years combined.

Average returns for the coming week have been positive by all measures.

Report for the first 5 days of December.
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 2
               Day1      Day2      Day3      Day4      Day5      Totals
 1966-2      -0.07% 4  -0.15% 5   0.13% 1  -0.38% 2   0.13% 3    -0.34%
 1970-2       1.54% 2   0.24% 3   1.21% 4  -0.10% 5   1.07% 1     3.96%
 1974-2      -2.05% 1  -1.88% 2  -0.15% 3  -2.47% 4  -1.21% 5    -7.75%

 1978-2       1.31% 5   0.33% 1   0.94% 2   0.66% 3   0.08% 4     3.33%
 1982-2       1.41% 3   0.25% 4   0.41% 5   0.90% 1   0.57% 2     3.54%
 1986-2      -0.47% 1   0.79% 2   0.65% 3   0.28% 4  -0.30% 5     0.95%
 1990-2       0.63% 1   0.77% 2   1.86% 3   0.38% 4  -0.20% 5     3.44%
 1994-2      -1.35% 4   0.65% 5   0.09% 1  -0.60% 2  -0.94% 3    -2.14%

 Avg          0.31%     0.56%     0.79%     0.33%    -0.16%       1.82%

 1998-2       2.78% 2  -0.43% 3  -2.04% 4   2.50% 5   1.87% 1     4.67%
 2002-2       0.41% 1  -2.41% 2  -1.28% 3  -1.37% 4   0.83% 5    -3.83%
 2006-2      -0.76% 5   1.46% 1   0.16% 2  -0.27% 3  -0.74% 4    -0.15%
 2010-2       2.05% 3   1.17% 4   0.47% 5   0.13% 1   0.14% 2     3.96%
 2014-2      -1.34% 1   0.60% 2   0.39% 3  -0.11% 4   0.24% 5    -0.22%

 Avg          0.63%     0.08%    -0.46%     0.18%     0.47%       0.89%

OTC summary for Presidential Year 2 1966 - 2014
Averages      0.31%     0.11%     0.22%    -0.03%     0.12%       0.72%
% Winners       54%       69%       77%       46%       62%         54%
MDD  12/6/1974  7.53% --  12/5/2002  4.99% --  12/3/1998  2.47%

OTC summary for all years 1963 - 2014
Averages      0.14%     0.16%     0.41%     0.02%     0.03%       0.76%
% Winners       60%       62%       67%       56%       49%         58%
MDD 12/1/2008  8.95% --  12/6/1974  7.53% --  12/5/1975  5.18%


SPX Presidential Year 2
               Day1      Day2      Day3      Day4      Day5      Totals
 1930-2       1.39% 1   0.95% 2  -1.71% 3  -1.50% 4   0.06% 5    -0.81%
 1934-2      -0.10% 6  -1.26% 1   0.74% 2   0.84% 3  -0.21% 4     0.01%

 1938-2      -0.94% 4  -1.03% 5  -0.08% 6  -0.56% 1   0.81% 2    -1.81%
 1942-2      -0.11% 2   0.32% 3   0.32% 4   0.00% 5   0.11% 6     0.64%
 1946-2      -1.57% 1   0.35% 2   1.59% 3  -0.54% 4   0.41% 5     0.23%
 1950-2       0.77% 5  -0.61% 6  -2.76% 1   1.63% 2   0.73% 3    -0.25%
 1954-2      -0.73% 3   0.56% 4   0.91% 5   0.78% 1   0.46% 2     1.98%

 Avg         -0.52%    -0.08%    -0.01%     0.26%     0.50%       0.16%

 1958-2       0.40% 1  -0.44% 2   0.13% 3   0.04% 4  -0.17% 5    -0.04%
 1962-2      -0.51% 1   1.13% 2   0.40% 3   0.06% 4   0.21% 5     1.29%
 1966-2      -0.46% 4   0.06% 5   0.14% 1   0.75% 2   1.09% 3     1.58%
 1970-2       0.31% 2   1.15% 3   0.47% 4   0.63% 5   0.54% 1     3.11%
 1974-2      -2.66% 1  -1.38% 2   0.36% 3  -1.90% 4  -1.69% 5    -7.27%

 Avg         -0.58%     0.11%     0.30%    -0.08%    -0.01%      -0.27%

 1978-2       1.67% 5  -0.14% 1   1.34% 2   0.05% 3  -0.42% 4     2.51%
 1982-2       0.13% 3   0.07% 4  -0.09% 5   2.22% 1   0.67% 2     3.00%
 1986-2      -0.07% 1   1.99% 2  -0.06% 3  -0.32% 4  -0.74% 5     0.80%
 1990-2       0.58% 1   0.69% 2   1.09% 3  -0.26% 4  -0.40% 5     1.71%
 1994-2      -1.05% 4   0.98% 5   0.01% 1  -0.05% 2  -0.41% 3    -0.53%

 Avg          0.25%     0.72%     0.46%     0.33%    -0.26%       1.50%

 1998-2       1.01% 2  -0.35% 3  -1.80% 4   2.31% 5   0.93% 1     2.10%
 2002-2      -0.19% 1  -1.47% 2  -0.35% 3  -1.20% 4   0.63% 5    -2.58%
 2006-2      -0.28% 5   0.89% 1   0.40% 2  -0.13% 3  -0.40% 4     0.48%
 2010-2       2.16% 3   1.28% 4   0.26% 5  -0.13% 1   0.05% 2     3.63%
 2014-2      -0.68% 1   0.64% 2   0.38% 3  -0.12% 4   0.17% 5     0.38%

 Avg          0.40%     0.20%    -0.22%     0.15%     0.28%       0.80%

SPX summary for Presidential Year 2 1930 - 2014
Averages     -0.04%     0.20%     0.08%     0.12%     0.11%       0.46%
% Winners       41%       64%       68%       45%       64%         68%
MDD  12/6/1974  7.09% --  12/4/1950  3.36% --  12/4/1930  3.18%

SPX summary for all years 1928 - 2017
Averages     -0.02%     0.13%     0.23%     0.09%     0.12%       0.55%
% Winners       49%       56%       63%       53%       49%         67%
MDD 12/1/2008  8.93% --  12/6/1974  7.09% --  12/6/1928  5.64%

December
Since 1963, over all years, the OTC in December has been up 62% of the time with an average gain of 1.8%. During the 2nd year of the Presidential Cycle, December has been up 62% time with an average gain of 1.1% The best December ever for the OTC was 1999 (+22.0%), the worst 2002 (-9.7%).

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 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when 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 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point.

 In the chart below the blue line shows the average of the OTC in December over all years since 1963 while the grey line shows the average during the 2nd year of the Presidential Cycle over the same period.

Since 1928 the SPX has been up 73% of the time in December with an average gain of 1.4%. During the 2nd year of the Presidential Cycle the SPX has been up 68% of the time with an average gain of 1.6%. The best December ever for the SPX was 1991 (+11.2%) the worst 1931 (-14.5%).

The chart below is similar to the one above except it shows the average daily performance over all years for the SPX in December in red and the performance during the 2nd year of the Presidential Cycle in grey.

Since 1979 the Russell 2000 (R2K) has been up 77% of the time in December with an average gain of 2.5%.  During the 2nd year of the Presidential Cycle the R2K has been up 78% of the time in December with an average gain of 1.7%.  The best December ever for the R2K, 1999 (+11.2%), the worst 2002 (-5.7%).
The chart below is similar to those above except it shows the daily performance over all years of the R2K in December in magenta and the performance during the 2nd year of the Presidential Cycle in grey.

Since 1885 the DJIA has been up 70% of the time in December with an average gain of 1.3%.  During the 2nd year of the Presidential Cycle the DJIA has been up 70% of the time in December with an average gain of 1.3%.  The best December ever for the DJIA, 1903 (+10.8%), the worst 1931 (-17.0%).

The chart below is similar to those above except it shows the daily performance over all years of the DJIA in December in Black and the performance during the 2nd year of the Presidential Cycle in grey.

Conclusion

Prices rallied strongly last week, but that rally was not confirmed by the breadth indicators. Seasonality remains positive for another week.

I expect the major averages to be higher on Friday, December 7 than they were on Friday, November 30.