The good news is:
•New lows have remained at benign levels.
The Negatives
The market had a bad week, new highs decreased, new lows increased and the secondaries underperformed the blue chips.
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.
New highs fell to their lowest level in the last 6 months.
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.
OTC NH fell sharply.
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 tumbled into negative territory.
The positives
There is not much good to say about the markets, performance last week, except, it was following the average seasonal pattern and that pattern will be ending in the next week.
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 tumbled last week, but remained in positive territory.
Seasonality
Next week includes the 5 trading days prior to the 3rd Friday of October 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 modestly positive by all measures.
Report for the week before the 3rd Friday of October.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.
| OTC Presidential Year 4 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1964-4 | 0.00% | 0.09% | -0.07% | -0.27% | 0.11% | -0.14% |
| 1968-4 | 0.04% | 0.35% | 0.00% | 0.27% | -0.01% | 0.65% |
| 1972-4 | -1.04% | 0.44% | 0.49% | -0.11% | 0.86% | 0.65% |
| 1976-4 | -0.40% | -0.29% | 0.61% | -0.64% | 0.37% | -0.35% |
| 1980-4 | 0.55% | 0.08% | 0.21% | -0.74% | -0.36% | -0.27% |
| 1984-4 | 0.63% | -0.16% | -0.07% | 1.08% | 0.57% | 2.05% |
| 1988-4 | 0.11% | 0.32% | -0.13% | 0.74% | -0.01% | 1.04% |
| 1992-4 | 0.58% | 0.45% | -0.04% | 0.42% | 0.69% | 2.10% |
| Avg | 0.29% | 0.08% | 0.12% | 0.17% | 0.25% | 0.91% |
| 1996-4 | 0.65% | 0.14% | -0.56% | -0.72% | 0.04% | -0.46% |
| 2000-4 | -0.80% | -2.32% | -1.32% | 7.79% | 1.89% | 5.24% |
| 2004-4 | 0.46% | -0.19% | -0.24% | -0.91% | 0.45% | -0.44% |
| 2008-4 | 11.81% | -3.54% | -8.47% | 5.49% | -0.37% | 4.91% |
| 2012-4 | 0.66% | 1.21% | 0.10% | -1.01% | -2.19% | -1.23% |
| Avg | 2.55% | -0.94% | -2.10% | 2.13% | -0.04% | 1.60% |
| OTC summary for Presidential Year 4 1964 - 2012 | ||||||
| Avg | 1.10% | -0.26% | -0.79% | 0.88% | 0.16% | 1.06% |
| Win% | 75% | 62% | 33% | 46% | 62% | 54% |
| OTC summary for all years 1963 - 2015 | ||||||
| Avg | 0.35% | -0.03% | -0.23% | 0.47% | -0.11% | 0.44% |
| Win% | 62% | 53% | 48% | 66% | 57% | 53% |
| SPX Presidential Year 4 | ||||||
| Year | Mon | Tue | Wed | Thur | Fri | Totals |
| 1956-4 | -0.30% | -0.51% | -0.77% | 0.17% | -0.22% | -1.63% |
| 1960-4 | -0.42% | -0.51% | -0.18% | -0.72% | -1.00% | -2.84% |
| 1964-4 | 0.02% | -0.33% | -0.20% | -0.64% | 0.69% | -0.45% |
| 1968-4 | 0.14% | 0.20% | 0.00% | 0.46% | 0.78% | 1.58% |
| 1972-4 | -1.07% | 0.68% | 0.64% | -0.13% | 1.10% | 1.23% |
| Avg | -0.32% | -0.09% | -0.13% | -0.17% | 0.27% | -0.42% |
| 1976-4 | - 0.90% | -0.82% | 1.30% | -1.21% | -0.03% | -1.66% |
| 1980-4 | 1.34% | -0.01% | 1.27% | -1.11% | -0.53% | 0.96% |
| 1984-4 | 0.97% | -0.60% | -0.39% | 2.41% | -0.08% | 2.31% |
| 1988-4 | 0.33% | 1.07% | -0.86% | 2.13% | 0.28% | 2.95% |
| 1992-4 | 1.19% | 0.46% | 0.02% | 0.06% | 0.52% | 2.24% |
| Avg | 0.58% | 0.02% | 0.27% | 0.46% | 0.03% | 1.36% |
| 1996-4 | 0.41% | -0.14% | 0.26% | 0.37% | 0.54% | 1.44% |
| 2000-4 | 0.03% | -1.79% | -0.58% | 3.47% | 0.59% | 1.72% |
| 2004-4 | 0.20% | -0.23% | -0.73% | -0.93% | 0.45% | -1.24% |
| 2008-4 | 11.58% | -0.53% | -9.03% | 4.25% | -0.62% | 5.64% |
| 2012-4 | 0.81% | 1.03% | 0.41% | -0.24% | -1.66% | 0.34% |
| Avg | 2.61% | -0.33% | -1.93% | 1.38% | -0.14% | 1.58% |
| SPX summary for Presidential Year 4 1956 - 2012 | ||||||
| Avg | 0.96% | -0.13% | -0.63% | 0.56% | 0.05% | 0.84% |
| Win% | 73% | 33% | 43% | 53% | 53% | 67% |
| SPX summary for all years 1953 - 2015 | ||||||
| Avg | 0.39% | -0.01% | -0.27% | 0.27% | -0.15% | 0.24% |
| Win% | 65% | 38% | 47% | 60% | 50% | 60% |
Money supply (M2) and Interest Rates
The following charts were supplied by Gordon Harms. M2 growth has remained on its elevated trend of the past 6 months.
Interest rates have turned upward in the last month or two, but the yield curve has remained pretty flat.
Conclusion
The market had a rough week. The secondaries led the way down and the breadth indicators confirmed the weakness. However, it was coincident with the average seasonal pattern which begins to turn up in the next week.
I expect the major averages to be higher on Friday October 21 than they were on Friday October 14.
These reports are archived at: http://www.safehaven.com/
Good Luck,
YTD W 16 / L 17 / T 8
