The good news is:
• Most of the major indices were up last week and new lows remained at benign levels.
The Negatives
The perfect storm.
New highs have been declining, new lows increasing and seasonality goes bad for the rest of the month.
The first chart covers the past 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.
I mentioned last week how this indicator, when its value was above 130, implemented a No Sell Filter (NSF) in a timing program I developed years ago.
Last week, NY NH dropped below the NSF threshold for the first time since last June.
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 from NASDAQ data.
In spite of an up week for the index, OTC NH is falling sharply.
The positives
New lows increased a little last week, but remain well below threatening levels.
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.
OTC HL Ratio fell sharply last week, but at 58% remains positive.
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 from NYSE data.
NY HL Ratio at 60% remained positive.
Seasonality
Next week includes the 5 trading days prior to the 4th Friday of September during the 4th 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 2015 while SPX data runs from 1953 to 2015. There are summaries for both the 4th 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 negative by all measures.
Report for the week before the 4th Friday of September.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.
| OTC Presidential Year 4 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1964-4 | 0.28% | 0.52% | 0.33% | 0.21% | 0.56% | 1.90% |
| 1968-4 | 0.03% | 0.14% | 0.00% | -0.09% | -0.08% | 0.00% |
| 1972-4 | -0.05% | -0.15% | 0.07% | -0.16% | 0.13% | -0.16% |
| 1976-4 | 0.31% | 0.58% | 0.02% | -0.18% | 0.04% | 0.76% |
| 1980-4 | 0.31% | -0.45% | 0.07% | -0.58% | -1.69% | -2.34% |
| 1984-4 | -0.74% | -0.31% | 0.09% | 0.02% | -0.14% | -1.09% |
| 1988-4 | -0.12% | 0.17% | 0.21% | -0.01% | 0.03% | 0.28% |
| 1992-4 | -0.09% | -0.95% | -0.01% | 0.51% | -1.49% | -2.03% |
| Avg | -0.07% | -0.19% | 0.08% | -0.05% | -0.65% | -0.88% |
| 1996-4 | -0.67% | 0.31% | 0.77% | 0.27% | 0.17% | 0.86% |
| 2000-4 | -2.83% | 3.73% | 0.82% | -1.76% | -0.66% | -0.69% |
| 2004-4 | -0.11% | 0.69% | -1.85% | 0.04% | -0.37% | -1.60% |
| 2008-4 | -4.17% | -1.18% | 0.11% | 1.43% | -0.15% | -3.96% |
| 2012-4 | -0.60% | -1.36% | -0.77% | 1.39% | -0.65% | -2.00% |
| Avg | -1.68% | 0.44% | -0.18% | 0.27% | -0.33% | -1.48% |
| OTC summary for Presidential Year 4 1964 - 2012 | ||||||
| Avg | -0.65% | 0.13% | -0.01% | 0.08% | -0.33% | -0.77% |
| Win% | 31% | 54% | 75% | 54% | 38% | 38% |
| OTC summary for all years 1963 - 2015 | ||||||
| Avg | -0.28% | -0.10% | 0.05% | -0.37% | -0.13% | -0.83% |
| Win% | 39% | 49% | 54% | 37% | 47% | 41% |
| SPX Presidential Year 4 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1956-4 | -0.39% | -1.40% | 0.15% | -0.48% | -0.55% | -2.66% |
| Avg | -0.39% | -1.40% | 0.15% | -0.48% | -0.55% | -2.66% |
| 1960-4 | -2.27% | 0.28% | 1.04% | -0.38% | -0.85% | -2.18% |
| 1964-4 | 0.46% | 0.04% | 0.02% | 0.11% | 0.25% | 0.87% |
| 1968-4 | 0.57% | 0.34% | 0.00% | -0.22% | -0.05% | 0.64% |
| 1972-4 | -0.18% | -0.06% | 0.05% | -0.16% | 0.08% | -0.27% |
| 1976-4 | 0.05% | 1.42% | -0.34% | -0.50% | -0.11% | 0.51% |
| Avg | -0.28% | 0.40% | 0.19% | -0.23% | -0.13% | -0.09% |
| 1980-4 | 0.89% | -0.74% | 0.73% | -1.27% | -1.84% | -2.23% |
| 1984-4 | -0.24% | 0.21% | 0.40% | 0.41% | -0.52% | 0.26% |
| 1988-4 | -0.68% | 0.34% | 0.16% | -0.36% | 0.22% | -0.33% |
| 1992-4 | -0.19% | -1.18% | 0.07% | 0.25% | -0.98% | -2.04% |
| 1996-4 | -0.08% | -0.13% | 0.03% | 0.01% | 0.05% | -0.12% |
| Avg | -0.06% | -0.30% | 0.28% | -0.19% | -0.62% | -0.89% |
| 2000-4 | -1.45% | 1.07% | -0.59% | -0.16% | -0.02% | -1.15% |
| 2004-4 | -0.56% | 0.63% | -1.39% | -0.47% | 0.16% | -1.63% |
| 2008-4 | -3.82% | -1.56% | -0.20% | 1.97% | 0.32% | -3.30% |
| 2012-4 | -0.22% | -1.05% | -0.57% | 0.96% | -0.45% | -1.33% |
| SPX summary for Presidential Year 4 1956 - 2012 | ||||||
| Avg | -0.54% | -0.12% | -0.03% | -0.02% | -0.29% | -1.00% |
| Win% | 27% | 53% | 64% | 40% | 40% | 27% |
| SPX summary for all years 1953 - 2015 | ||||||
| Avg | -0.43% | -0.05% | -0.06% | -0.24% | -0.14% | -0.90% |
| Win% | 31% | 45% | 50% | 38% | 41% | 34% |
Conclusion
Last week, while the major indices were up, the breadth indicators headed south. Beginning this week, seasonality heads south for the rest of the month.
I expect the major averages to be lower on Friday September 23 than they were on Friday September 16.
These reports are archived at: http://www.safehaven.com/
Good Luck,
YTD W 15 / L 15 / T 7
