The good news is:
• The secondaries outperformed the blue chips last week.
The negatives
The negatives disappeared.
The positives
New lows continued declining last week and held below threatening levels during Thursday's big decline.
The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in orange. OTC NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good). Dashed vertical lines have been drawn on the 1st trading day of each month.
OTC NL continued to rise even during Thursday's big drop.
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NL, in dark blue has been calculated from NYSE data.
NY NL has also been moving sharply upward.
The next chart shows the OTC in blue and the ratio of NASDAQ new highs to 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 neutral 50% level.
OTC HL Ratio rose and held above the neutral level last week.
The chart below is similar to the one above except it shows the SPX in red and NY HL Ratio, in dark blue, has been calculated from NYSE data.
NY HL Ratio finished comfortably above the neutral level last week.
Seasonality
Next week includes the last 5 trading days of June during the 4th year of the Presidential Cycle.
The tables below show the daily return on a percentage basis for the last 5 trading days of June during the 4th year of the Presidential Cycle.
OTC data covers the period from 1963 - 2011 and SPX data covers the period from 1928 - 2011. There are summaries for both the 4th year of the Presidential Cycle and all years combined.
Average returns for the coming week have been mixed, down slightly over all over all periods for the SPX and up slightly over all periods for the OTC.
Report for the last 5 days of June.
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 4 | ||||||
| Day5 | Day4 | Day3 | Day2 | Day1 | Totals | |
| 1964-4 | -0.13% 3 | 0.38% 4 | 0.28% 5 | 0.40% 1 | -0.05% 2 | 0.88% |
| 1968-4 | -0.14% 5 | 0.19% 1 | 0.39% 2 | -0.33% 4 | -0.22% 5 | -0.11% |
| 1972-4 | -0.70% 1 | 0.37% 2 | -0.16% 3 | -0.18% 4 | 0.56% 5 | -0.10% |
| 1976-4 | 0.68% 4 | 0.28% 5 | -0.20% 1 | 0.27% 2 | 0.23% 3 | 1.26% |
| 1980-4 | 0.43% 2 | 0.69% 3 | 0.16% 4 | 0.11% 5 | -0.88% 1 | 0.51% |
| 1984-4 | -0.11% 1 | -0.82% 2 | -0.70% 3 | 0.47% 4 | 0.56% 5 | -0.60% |
| 1988-4 | 0.15% 5 | -0.67% 1 | 0.69% 2 | 0.00% 3 | 0.77% 4 | 0.93% |
| Avg | 0.09% | -0.03% | -0.04% | 0.13% | 0.25% | 0.40% |
| 1992-4 | -0.36% 3 | -0.58% 4 | -0.07% 5 | 2.00% 1 | 0.86% 2 | 1.86% |
| 1996-4 | 0.64% 1 | -0.87% 2 | -1.65% 3 | 1.10% 4 | 1.63% 5 | 0.85% |
| 2000-4 | 1.74% 1 | -1.36% 2 | 2.11% 3 | -1.60% 4 | 2.29% 5 | 3.18% |
| 2004-4 | -0.27% 4 | 0.49% 5 | -0.28% 1 | 0.75% 2 | 0.63% 3 | 1.32% |
| 2008-4 | -0.73% 2 | 1.39% 3 | -3.33% 4 | -0.25% 5 | -0.98% 1 | -3.89% |
| Avg | 0.20% | -0.18% | -0.64% | 0.40% | 0.89% | 0.66% |
| OTC summary for Presidential Year 4 1964 - 2008 | ||||||
| Averages | 0.10% | -0.04% | -0.23% | 0.23% | 0.45% | 0.51% |
| % Winners | 42% | 58% | 42% | 58% | 67% | 67% |
| MDD 6/30/2008 4.51% -- 6/26/1996 2.50% -- 6/27/1984 1.62% | ||||||
| OTC summary for all years 1963 - 2011 | ||||||
| Averages | -0.13% | -0.06% | 0.05% | 0.12% | 0.20% | 0.19% |
| % Winners | 45% | 45% | 55% | 63% | 61% | 63% |
| MDD 6/30/2010 6.43% -- 6/30/1970 6.40% -- 6/29/1965 4.79% | ||||||
| SPX Presidential Year 4 | ||||||
| Day5 | Day4 | Day3 | Day2 | Day1 | Totals | |
| 1928-4 | 1.14% 2 | 0.96% 3 | 1.11% 4 | 0.37% 5 | 0.26% 6 | 3.84% |
| 1932-4 | -0.22% 6 | -3.27% 1 | 0.00% 2 | 1.58% 3 | -1.77% 4 | -3.68% |
| 1936-4 | -1.06% 4 | -0.33% 5 | 0.13% 6 | -0.53% 1 | -0.34% 2 | -2.13% |
| 1940-4 | -2.87% 2 | -0.61% 3 | 1.03% 4 | 1.32% 5 | 0.00% 6 | -1.14% |
| 1944-4 | 0.54% 1 | 0.31% 2 | -0.54% 3 | -0.08% 4 | 0.31% 5 | 0.54% |
| 1948-4 | -0.24% 4 | -0.36% 5 | -1.31% 1 | 0.48% 2 | 0.30% 3 | -1.12% |
| Avg | -0.77% | -0.85% | -0.14% | 0.55% | -0.30% | -1.50% |
| 1952-4 | 0.16% 2 | 0.24% 3 | 0.36% 4 | 0.32% 5 | 0.52% 1 | 1.62% |
| 1956-4 | -0.39% 1 | 0.67% 2 | 0.75% 3 | 0.13% 4 | -0.34% 5 | 0.82% |
| 1960-4 | 0.16% 5 | -0.61% 1 | -0.68% 2 | 0.00% 3 | -0.04% 4 | -1.17% |
| 1964-4 | 0.36% 3 | 0.19% 4 | 0.31% 5 | 0.22% 1 | 0.06% 2 | 1.13% |
| 1968-4 | 0.15% 5 | -0.27% 1 | -0.31% 2 | -0.10% 4 | -0.40% 5 | -0.93% |
| Avg | 0.09% | 0.04% | 0.09% | 0.11% | -0.04% | 0.30% |
| 1972-4 | -0.73% 1 | -0.10% 2 | -0.33% 3 | -0.19% 4 | 0.30% 5 | -1.05% |
| 1976-4 | 0.52% 4 | -0.07% 5 | -0.28% 1 | 0.42% 2 | 0.40% 3 | 1.00% |
| 1980-4 | 0.55% 2 | 1.37% 3 | -0.45% 4 | -0.16% 5 | -1.52% 1 | -0.21% |
| 1984-4 | -0.32% 1 | -0.82% 2 | -0.70% 3 | 0.79% 4 | 0.22% 5 | -0.82% |
| 1988-4 | -0.38% 5 | -1.72% 1 | 1.21% 2 | -0.49% 3 | 0.93% 4 | -0.45% |
| Avg | -0.07% | -0.27% | -0.11% | 0.07% | 0.07% | -0.31% |
| 1992-4 | -0.05% 3 | -0.18% 4 | 0.08% 5 | 1.36% 1 | -0.20% 2 | 1.02% |
| 1996-4 | 0.30% 1 | -0.05% 2 | -0.61% 3 | 0.63% 4 | 0.31% 5 | 0.57% |
| 2000-4 | 0.96% 1 | -0.32% 2 | 0.29% 3 | -0.85% 4 | 0.85% 5 | 0.92% |
| 2004-4 | -0.30% 4 | -0.55% 5 | -0.10% 1 | 0.25% 2 | 0.41% 3 | -0.28% |
| 2008-4 | -0.28% 2 | 0.58% 3 | -2.94% 4 | -0.37% 5 | 0.13% 1 | -2.88% |
| Avg | 0.13% | -0.10% | -0.65% | 0.20% | 0.30% | -0.13% |
| SPX summary for Presidential Year 4 1928 - 2008 | ||||||
| Averages | -0.09% | -0.23% | -0.14% | 0.24% | 0.02% | -0.21% |
| % Winners | 48% | 33% | 43% | 57% | 62% | 43% |
| MDD 6/30/1932 3.70% -- 6/26/1940 3.47% -- 6/27/2008 3.30% | ||||||
| SPX summary for all years 1928 - 2011 | ||||||
| Averages | -0.18% | -0.01% | -0.08% | 0.13% | 0.12% | -0.03% |
| % Winners | 44% | 45% | 51% | 58% | 57% | 51% |
| MDD 6/29/1950 8.88% -- 6/29/1939 5.93% -- 6/30/2010 5.62% | ||||||
Money supply (M2)
The money supply chart was provided by Gordon Harms. M2 growth accelerated sharply last week.
Conclusion
All of the indicators are moving upward and Thursday's sharp decline looks like a brief correction in an up market.
I expect the major averages to be higher on Friday June 29 than they were on Friday June 22.
Last week the secondaries were up a little while the blue chips were down a little, so I am calling last weeks positive forecast a tie.
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Good Luck,
YTD W 7 /L11/T 7
