The next chart is similar to the one above except is shows the NASDAQ composite (OTC) in blue and OTC NH, in green, has been calculated with NASDAQ data.

After confirming the OTC high, OTC NH has deteriorated more quickly than prices.

Seasonality
Next week includes the 5 trading days prior to the 2nd Friday of December 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.

Average returns for the coming week have been mixed, but mostly positive.

​​​​​​The Positives

For the second week, the Russell 2000 (R2K) continued as the strongest of the major indices.

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 declined a bit to 66%.

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 with NYSE data.

NY HL Ratio also declined a bit finishing the week at a comfortable 78%.

Conclusion
NYSE new highs are a concern as is Seasonality for the next 2 weeks.  Strength in the R2K offers some comfort.

I expect the major averages to be lower on Friday December 13 than they were on Friday December 6.

Last week the Dow Jones Industrial Average and OTC were down a little while the SPX and R2K were up a little; so I am calling last weeks positive forecast a tie.

Good Luck,
Mike Burk
YTD W 24 / L 13 / T 11

Technical market report for December 7, 2019.

The good news is: The secondaries have been outperforming the blue chips.


The Negatives

The market has been doing a pretty good job of following its average seasonal pattern.  For the next 2 weeks that pattern leaves a little to be desired.

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. 

NY NH has continued to deteriorate.

Report for the week before the 2nd Friday of December.
The number following the year is the position in the Presidential Cycle.
Daily returns from Monday to 2nd Friday.

OTC Presidential Year 3 (PY3)
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1963-3  -0.25%   0.14%   0.26%   0.25%  -0.37%   0.03%
 1967-3   0.87%   0.99%   0.47%   0.37%   0.09%   2.79%
 1971-3  -0.32%   0.32%   0.42%   0.24%   0.78%   1.44%
 1975-3   0.27%  -0.53%   0.98%  -0.23%  -0.23%   0.26%

 1979-3   0.33%  -0.09%   0.46%   0.31%   0.71%   1.71%
 1983-3  -0.50%  -0.16%   0.04%  -0.56%  -0.02%  -1.20%
 1987-3   0.63%   1.08%   1.34%  -0.38%   0.59%   3.26%
 1991-3  -0.18%  -0.21%  -0.48%   0.82%   0.91%   0.86%
 1995-3   1.37%  -0.36%  -0.39%  -0.80%   0.87%   0.69%

 Avg      0.33%   0.05%   0.19%  -0.12%   0.61%   1.06%

 1999-3   0.72%   1.15%  -0.02%   0.23%   0.72%   2.80%
 2003-3   0.57%  -2.08%  -0.19%   1.98%   0.34%   0.62%
 2007-3   0.47%  -2.45%   0.71%  -0.10%  -1.23%  -2.59%
 2011-3   1.10%  -0.23%  -0.01%  -1.99%   1.94%   0.80%
 2015-3  -0.79%  -0.07%  -1.48%   0.44%  -2.21%  -4.11%

 Avg      0.41%  -0.74%  -0.20%   0.11%  -0.09%  -0.50%

OTC summary for PY3 1963 - 2015 
 Avg      0.31%  -0.18%   0.15%   0.04%   0.21%   0.53%
 Win%       64%     36%     57%     57%     64%     79%

OTC summary for all years 1963 - 2018
 Avg      0.13%   0.06%  -0.03%  -0.32%   0.15%  -0.01%
 Win%       61%     50%     53%     48%     55%     48%


SPX PY3
 Year       Mon     Tue     Wed    Thur    Fri    Totals
 1955-3   0.57%   0.00%  -0.33%   0.59%   0.15%   0.99%

 1959-3   0.19%   0.64%  -0.62%   0.08%  -0.24%   0.06%
 1963-3  -0.05%   0.04%  -0.12%   0.01%   0.20%   0.08%
 1967-3   0.63%   0.14%   0.43%  -0.12%  -0.12%   0.97%
 1971-3  -0.57%   0.37%   0.05%   0.04%   0.75%   0.65%
 1975-3   0.29%   0.26%   0.89%  -0.32%   0.03%   1.16%

 Avg      0.10%   0.29%   0.13%  -0.06%   0.13%   0.58%

 1979-3   0.14%  -0.17%   0.03%   0.14%   1.16%   1.30%
 1983-3   0.20%  -0.18%   0.27%  -0.43%  -0.07%  -0.21%
 1987-3   2.16%   2.69%   1.69%  -2.23%   0.75%   5.07%
 1991-3  -0.22%  -0.10%  -0.05%   1.02%   0.77%   1.41%
 1995-3   1.10%   0.65%   0.40%  -0.65%   0.21%   1.73%

 Avg      0.68%   0.58%   0.47%  -0.43%   0.56%   1.86%

 1999-3  -0.69%  -1.00%  -0.38%   0.30%   0.64%  -1.13%
 2003-3   0.73%  -0.85%  -0.11%   1.15%   0.27%   1.20%
 2007-3   0.75%  -2.53%   0.61%   0.12%  -1.37%  -2.42%
 2011-3   1.03%   0.11%   0.20%  -2.11%   1.69%   0.92%
 2015-3  -0.70%  -0.65%  -0.77%   0.23%  -1.94%  -3.84%

 Avg      0.22%  -0.98%  -0.09%  -0.06%  -0.14%  -1.06%

SPX summary for PY3 1955 - 2015 
 Avg      0.35%  -0.04%   0.14%  -0.14%   0.18%   0.50%
 Win%       69%     53%     56%     63%     69%     75%

SPX summary for all years 1953 - 2018
 Avg      0.16%  -0.01%   0.01%  -0.27%   0.14%   0.03%
 Win%       58%     45%     52%     42%     64%     53%