Seasonality
Next week includes the 5 trading days prior to the 4th Friday of January 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.  Some of the entries for Monday show 0’s.  These are weeks like next week where the Martin Luther King holiday occurred prior to the 4th Friday of January.

Average returns for the coming week have been have been positive by all measures.

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 continued moving sharply upward.

​​​​​The Positives

New lows have been minimal while new highs are beginning to show a little life.

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 vertical lines have been drawn on the first 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.

 NY HL Ratio continued its upward move. 

The next chart is similar to the one above except is shows the SPX in red and NY NH, in green, has been calculated with NYSE data.

Not quite as strong as the NASDAQ chart, but, an upward move is perceptible.

As you can see in the charts below there has been a little life in new highs.

The next chart covers the past 6 months showing the OTC in blue and a 10% trend of NASDAQ new highs (OTC NH) in green.

Not much there yet, but, it is beginning to move in the right direction.

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

OTC HL Ratio has stalled because there have not been enough new highs to take the indicator any deeper into positive territory.

Report for the week before the 4th Friday of January.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through the 4th Friday.

OTC Presidential Year 3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3   0.23%  -0.03%   1.24%   0.11%   0.56%   2.10%

 1959-3  -0.23%   0.07%   0.57%  -0.12%   0.05%   0.34%
 1963-3   0.15%   0.25%   0.28%   0.20%   0.26%   1.13%
 1967-3   0.37%   0.14%  -0.76%  -0.05%   0.41%   0.11%
 1971-3   0.42%   0.33%  -0.73%   0.34%   0.70%   1.06%
 1975-3   0.17%  -0.53%   1.47%   0.46%   1.26%   2.83%

 Avg      0.18%   0.05%   0.17%   0.16%   0.54%   1.09%

 1979-3   0.15%   0.70%  -0.44%   1.03%   0.66%   2.10%
 1983-3  -2.70%   1.27%  -0.15%   1.93%   0.17%   0.52%
 1987-3   1.15%  -0.11%  -0.45%   2.27%  -1.39%   1.47%
 1991-3  -0.35%  -0.83%   0.58%   1.38%   0.39%   1.17%
 1995-3   0.22%   0.01%   0.34%   0.19%   0.44%   1.20%

 Avg     -0.31%   0.21%  -0.02%   1.36%   0.05%   1.29%

 1999-3   0.72%   1.48%  -0.73%   1.79%   1.12%   4.38%
 2003-3   0.00%  -1.57%  -1.04%   1.02%  -2.92%  -4.51%
 2007-3  -0.53%   0.35%   0.85%  -1.13%  -0.12%  -0.57%
 2011-3   0.58%   0.03%   0.42%   0.22%  -1.79%  -0.53%
 2015-3   0.00%   0.15%   0.47%   1.53%  -0.55%   1.61%

 Avg      0.26%   0.09%   0.00%   0.69%  -0.85%   0.07%

OTC summary for Presidential Year 3 1955 - 2015 
 Avg      0.12%   0.27%   0.13%   0.85%  -0.03%   1.33%
 Win%       73%     62%     38%     69%     77%     69%

OTC summary for all years 1963 - 2018
 Avg     -0.16%  -0.02%   0.23%   0.10%   0.04%   0.21%
 Win%       52%     53%     57%     46%     69%     60%


SPX Presidential Year 3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3   0.23%  -0.03%   1.24%   0.11%   0.56%   2.10%

 1959-3  -0.23%   0.07%   0.57%  -0.12%   0.05%   0.34%
 1963-3   0.15%   0.25%   0.28%   0.20%   0.26%   1.13%
 1967-3   0.37%   0.14%  -0.76%  -0.05%   0.41%   0.11%
 1971-3   0.42%   0.33%  -0.73%   0.34%   0.70%   1.06%
 1975-3   0.17%  -0.53%   1.47%   0.46%   1.26%   2.83%

 Avg      0.18%   0.05%   0.17%   0.16%   0.54%   1.09%

 1979-3   0.15%   0.70%  -0.44%   1.03%   0.66%   2.10%
 1983-3  -2.70%   1.27%  -0.15%   1.93%   0.17%   0.52%
 1987-3   1.15%  -0.11%  -0.45%   2.27%  -1.39%   1.47%
 1991-3  -0.35%  -0.83%   0.58%   1.38%   0.39%   1.17%
 1995-3   0.22%   0.01%   0.34%   0.19%   0.44%   1.20%

 Avg     -0.31%   0.21%  -0.02%   1.36%   0.05%   1.29%

 1999-3   0.72%   1.48%  -0.73%   1.79%   1.12%   4.38%
 2003-3   0.00%  -1.57%  -1.04%   1.02%  -2.92%  -4.51%
 2007-3  -0.53%   0.35%   0.85%  -1.13%  -0.12%  -0.57%
 2011-3   0.58%   0.03%   0.42%   0.22%  -1.79%  -0.53%
 2015-3   0.00%   0.15%   0.47%   1.53%  -0.55%   1.61%

 Avg      0.26%   0.09%   0.00%   0.69%  -0.85%   0.07%

SPX summary for Presidential Year 3 1953 - 2015 
 Avg      0.03%   0.11%   0.12%   0.70%  -0.05%   0.90%
 Win%       71%     69%     56%     81%     69%     81%

SPX summary for all years 1953 - 2018
 Avg     -0.12%   0.05%   0.20%   0.13%   0.02%   0.30%
 Win%       51%     62%     58%     58%     54%     67%

Technical market report for January 19, 2019.

The good news is: The secondaries are leading the way up.


The Negatives

The market is overbought.
All of the major indices are up 13% to 17% since the December 24 low.

The chart below covers the past 18 trading days showing all of, what I consider to be, the major indices plus the S&P mid cap index (MID).  Dashed vertical lines have been drawn on the 1st trading day of each week

  The stratification of change is exactly what you like to see at the beginning of an upward move.  The Russell 2000 (R2K) is leading the way upward followed by the NASDAQ composite (OTC), the S&P mid cap (MID), the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA) following the rest upward.  The negative is; the rate of change cannot be sustained.  On an annualized basis the R2K is moving upward at a rate of 83% a year while the DJIA, the laggard, is gaining at a 71% rate. 

Conclusion
The market looks to be in the early stages of a rally enhanced by a huge increase in M2.

I expect the major averages to be higher on Friday January 25 than they were on Friday January 18.

Good Luck,
Mike Burk
YTD W 2 / L 0 / T 0

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.

NY NL also continued to move sharply upward.