Technical Market Report

The good news is:

Prices have held up well in spite of a significant expansion in the number of new lows.

?The Negatives

Hindenburg Omens are triggered when both new highs and new lows exceed 2.8% of issues traded and the NYSE composite is above where it was 50 trading days earlier. The number of NYSE new highs last week never met the criteria. Our long run of Hindenburg Omens came to an end.

The first chart covers the past 9 months showing the Nasdaq composite (OTC) in blue and a 10% trend (19 day EMA) of Nasdaq new highs (OTC NH) in green. Dashed vertical lines have been drawn on the 1st trading day of each month.

I extended the duration of this chart to 9 months to show the progressive deterioration of OTC NH while the index was rising. The OTC is only 0.8% off its all-time high while OTC NH is close to its low for the period.

The next chart is similar to the one above one except it shows the S&P 500 (SPX) in red and NY NH, in green, has been calculated with NYSE data.
NY NH continued its fall while the SPX closed only 0.6% off its all-time high.

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).

OTC NL turned downward last week and the number of new lows remains uncomfortably high.

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.

You can see the SPX and NY NL move in similar patterns until September when NY NL moved sharply downward and the SPX continued moving upward.  This is a very unusual pattern.

The next chart covers the past 6 months showing the 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 horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio moved into negative territory finishing the week at 33%.

The Positives

In spite of deterioration of the breadth indicators prices have not broken their upward trends.

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

OTC HL Ratio also declined finishing the week at the neutral line.

Seasonality

Next week includes the first 5 trading days of October 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.

The OTC had a huge loss in 1998. Without that the average returns would all be positive.