The good news is:​ The market had a good week.

​The Negatives

After 4 consecutive up days for the major indices, the market is overbought. New lows remained at threatening levels again last week. Another Hindenburg Omen was triggered last Tuesday when new highs and new lows both exceeded 2.6% of issues traded on the NYSE. For the first time that I can recall the 10% trends of NYSE new highs and new lows are both above 2.6% of issues traded. The secondaries underperformed the blue chips in last weeks rally.

The first chart covers the past 6 months showing the NASDAQ composite (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 vertical lines have been drawn on the 1st 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.

 OTC HL Ratio recovered, but not enough to get into positive territory. It finished the week at a slightly negative 45%. 

The next chart covers the past 6 months showing the S&P 500 (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).

This indicator has been trending downward for the past month and turned slightly upward last week.  If there had been a serious bottom new lows would have disappeared and NY NL would have moved sharply upward.

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

OTC NL moved slightly upward, but not as sharply as you would see if a bottom were in place.

The Positives

The all-time highs for both the OTC & SPX a month ago were confirmed by most of the breadth indicators so new higher highs for the blue-chip indices are likely.

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

 NY HL Ratio recovered rapidly, closing the week in positive territory at 73%.  

The next chart covers the past 6 months showing the SPX in red and a 10% trend (19 day EMA) of NYSE new highs (NY NH) in green.
NY NH hit a new cycle high implying a new high for the SPX.

Seasonality

Next week includes the 5 trading days prior to the 2nd Friday of June 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 2018 while SPX data runs from 1953 to 2018. 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 modestly negative by all measures. 

Report for the week before the 2nd Friday of June.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3 (PY3)
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1963-3  -0.21%  -0.30%   0.21%   0.39%  -0.18%  -0.09%
 1967-3  -1.39%  -1.02%   1.26%   0.94%   0.83%   0.61%
 1971-3   0.09%  -0.67%  -0.21%   0.25%   0.13%  -0.41%
 1975-3  -0.90%  -0.73%   0.24%  -0.73%   0.53%  -1.58%

 1979-3   0.14%   0.81%   0.45%   0.70%   0.30%   2.41%
 1983-3   0.52%  -0.42%  -0.53%   0.08%   0.80%   0.45%
 1987-3   0.38%   0.54%   0.27%   0.13%   0.47%   1.80%
 1991-3  -0.54%   0.16%  -1.12%   0.02%   0.80%  -0.69%
 1995-3   1.13%  -0.39%   0.25%   0.52%  -0.20%   1.31%

 Avg      0.33%   0.14%  -0.14%   0.29%   0.44%   1.05%

 1999-3   2.44%  -1.97%   1.81%  -1.38%  -1.48%  -0.57%
 2003-3  -1.44%   1.48%   1.13%   0.46%  -1.64%  -0.01%
 2007-3   0.17%  -0.27%  -0.92%  -1.77%   1.27%  -1.53%
 2011-3  -1.11%  -0.04%  -0.97%   0.35%  -1.53%  -3.29%
 2015-3  -0.92%  -0.15%   1.25%   0.11%  -0.62%  -0.33%

 Avg     -0.17%  -0.19%   0.46%  -0.44%  -0.80%  -1.15%

OTC summary for PY3 1963 - 2015 
 Avg     -0.12%  -0.21%   0.22%   0.00%  -0.04%  -0.14%
 Win%       50%     29%     64%     79%     57%     36%

OTC summary for all years 1963 - 2018
 Avg     -0.19%  -0.18%   0.05%   0.05%   0.03%  -0.24%
 Win%       50%     30%     55%     64%     59%     38%


SPX PY3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3   0.83%   0.70%   0.67%  -0.54%   0.62%   2.28%

 1959-3  -1.30%  -0.70%   1.47%   0.10%   0.07%  -0.36%
 1963-3  -0.67%   0.13%   0.54%  -0.26%   0.03%  -0.22%
 1967-3  -1.51%   2.04%   0.75%   0.54%   0.18%   1.99%
 1971-3  -0.16%  -0.81%  -0.03%   0.35%   0.43%  -0.22%
 1975-3  -1.37%  -0.84%   0.12%  -0.52%   0.49%  -2.13%

 Avg     -1.00%  -0.04%   0.57%   0.04%   0.24%  -0.19%

 1979-3   0.15%   1.31%   0.68%   0.48%  -0.29%   2.32%
 1983-3   0.25%  -1.25%  -0.87%   0.29%   0.53%  -1.05%
 1987-3   1.11%   0.19%   0.06%   0.42%   0.97%   2.76%
 1991-3  -0.23%   0.66%  -1.15%   0.26%   1.23%   0.77%
 1995-3   0.58%  -0.01%  -0.45%  -0.15%  -0.83%  -0.86%

 Avg      0.37%   0.18%  -0.35%   0.26%   0.32%   0.79%

 1999-3   0.50%  -1.28%   0.10%  -1.21%  -0.70%  -2.58%
 2003-3  -1.20%   0.91%   1.28%   0.10%  -0.99%   0.11%
 2007-3   0.18%  -0.53%  -0.89%  -1.76%   1.14%  -1.86%
 2011-3  -1.08%  -0.10%  -0.42%   0.74%  -1.40%  -2.25%
 2015-3  -0.65%   0.04%   1.20%   0.17%  -0.70%   0.07%

 Avg     -0.45%  -0.19%   0.26%  -0.39%  -0.53%  -1.30%

SPX summary for PY3 1955 - 2015 
 Avg     -0.28%   0.03%   0.19%  -0.06%   0.05%  -0.08%
 Win%       44%     50%     63%     63%     63%     44%

SPX summary for all years 1953 - 2018
 Avg     -0.21%  -0.06%   0.05%   0.08%   0.13%   0.00%
 Win%       45%     44%     49%     58%     59%     45%​

Conclusion

Last weeks moon shot had all the makings of a counter-trend rally.

New lows did not go away and the secondaries underperformed the blue chips.

We are seeing all of the indications of a developing top, leadership narrowing, i.e. the blue chips going to new highs unconfirmed by the secondaries.

I expect the major averages to be lower on Friday, June 14 than they were on Friday, June 7. 

Last weeks negative forecast was a miss.