Conclusion
Breadth was weak last week and the secondaries underperformed the blue chips.  Seasonality for the coming week has been weak.

I expect the major averages to be lower on Friday July 20 than they were on Friday July 13.

Last week the Russell 2000 (R2K) was down while all of the other major indices were up.  I am calling last weeks positive forecast a tie.

Good Luck,
Mike Burk
YTD W 11 / L 11 / T 6

Seasonality
Next week includes the 5 trading days prior to the 3rd Friday of July 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 1953 to 2018.  There are summaries for both the 2nd 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 mostly negative.

​​​The Positives

Last week most of the major indices rose, the OTC finished the week at an all time high and new highs continued to outnumber new lows.

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 red.  Dashed horizontal lines have been drawn at 10% levels for the indicator; the line is solid at the 50%, neutral, level.

NY HL Ratio finished the week at a comfortable 73%.

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 did not rise with the index. 

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 fell as the index closed at a new all time high. 

At 68% the indicator is in comfortably positive territory.

The yield curve is continuing to compress.

Report for the week before the 3rd Friday of July.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday through 3rd Friday.

OTC Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1966-2   0.67%  -0.49%  -0.12%  -0.09%   0.87%   0.84%
 1970-2   0.33%  -0.68%  -0.80%   0.24%   0.83%  -0.08%
 1974-2   0.49%  -0.49%   1.51%   0.14%   0.81%   2.46%

 1978-2   0.64%  -0.22%   0.58%   0.77%  -0.12%   1.65%
 1982-2   0.46%   0.30%  -0.08%   0.24%   0.34%   1.25%
 1986-2  -0.42%   0.11%  -0.01%  -0.29%   0.29%  -0.32%
 1990-2   0.25%  -1.09%  -0.79%  -0.58%  -0.63%  -2.84%
 1994-2  -0.09%   0.39%   1.38%   0.31%  -0.03%   1.96%

 Avg      0.17%  -0.10%   0.22%   0.09%  -0.03%   0.34%

 1998-2   0.27%  -1.75%  -0.47%  -1.76%  -0.22%  -3.92%
 2002-2   0.66%  -0.53%   1.60%  -2.88%  -2.79%  -3.94%
 2006-2   0.02%   0.27%   1.83%  -1.98%  -0.93%  -0.79%
 2010-2   0.09%   1.99%   0.35%  -0.03%  -3.11%  -0.73%
 2014-2  -0.17%   0.71%   0.40%  -0.04%  -0.50%   0.40%

 Avg      0.18%   0.14%   0.74%  -1.34%  -1.51%  -1.80%

OTC summary for Presidential Year 2 1966 - 2014 
 Avg      0.25%  -0.11%   0.41%  -0.46%  -0.40%  -0.31%
 Win%       77%     46%     54%     38%     38%     46%

OTC summary for all years 1963 - 2017
 Avg     -0.09%  -0.10%   0.04%   0.04%  -0.19%  -0.31%
 Win%       57%     40%     52%     57%     44%     45%


SPX Presidential Year 2
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1954-2  -0.07%  -0.33%   0.23%   0.33%  -0.43%  -0.26%

 1958-2   1.22%   0.17%  -0.02%   0.54%   0.69%   2.60%
 1962-2   0.00%  -1.82%  -1.02%   0.39%   0.69%  -1.75%
 1966-2  -0.18%  -0.65%  -0.67%   0.60%   0.30%  -0.60%
 1970-2   0.04%  -0.95%   0.06%   1.26%  -0.23%   0.18%
 1974-2   0.76%  -1.16%   1.07%   0.10%  -0.29%   0.48%

 Avg      0.46%  -0.88%  -0.11%   0.58%   0.23%   0.18%

 1978-2   0.20%  -0.93%   1.29%  -0.09%  -0.29%   0.19%
 1982-2   0.68%  -0.11%   0.90%   0.03%   0.54%   2.05%
 1986-2  -0.05%   0.82%   0.21%  -0.30%   0.95%   1.63%
 1990-2   0.45%  -0.39%  -0.90%   0.30%  -1.02%  -1.55%
 1994-2  -0.33%  -0.02%   0.17%   1.04%   0.17%   1.03%

 Avg      0.19%  -0.13%   0.34%   0.20%   0.07%   0.67%

 1998-2  -0.22%  -1.60%  -0.09%  -2.10%   0.10%  -3.91%
 2002-2  -0.38%  -1.84%   0.55%  -2.70%  -3.83%  -8.20%
 2006-2  -0.14%   0.19%   1.86%  -0.85%  -0.71%   0.35%
 2010-2   0.07%   1.54%  -0.02%   0.12%  -2.88%  -1.17%
 2014-2  -0.23%   0.50%   0.18%   0.05%  -0.48%   0.01%

 Avg     -0.18%  -0.24%   0.50%  -1.10%  -1.56%  -2.58%

SPX summary for Presidential Year 2 1954 - 2014 
 Avg      0.12%  -0.41%   0.24%  -0.08%  -0.42%  -0.56%
 Win%       47%     31%     63%     69%     44%     56%

SPX summary for all years 1953 - 2017
 Avg     -0.11%  -0.19%   0.04%   0.00%  -0.12%  -0.38%
 Win%       48%     34%     53%     58%     48%     42%

Technical market report for July 14, 2018

The good news is:
The NASDAQ composite (OTC) closed at an all time high Friday.​


The Negatives

Volume and new highs continued to decline and the secondaries underperformed the blue chips.

The first chart covers the past 6 months showing the 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.


 OTC NH is a long way from confirming the new index high. 

Money supply (M2) and Interest Rates
The following charts were supplied by Gordon Harms.
M2 growth has continued above its long term trend.