Interest rates at the close Friday and their changes from last month.
2yr yield 2.196% down from 2.393%
5yr yield 2.176% down from 2.382%
10yr yield 2.394% down from 2.568%
30yr yield 2.828% down from 2.977%

All of the rates declined last month while the inversion between the 2yr and 5yr continued.

The next 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.

OTC NH has been following prices pretty closely.

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

 NY NH has also been following prices pretty closely. 

Seasonality
Next week includes the 5 trading days prior to Memorial Day during the 3rd year of the Presidential Cycle.  The tables below show the daily change, on a percentage basis, for that period. 

Since 1971 Memorial Day has been observed on the last Monday of May, the tables below reflect that starting date.  There are summaries for both the 3rd year of the Presidential Cycle and all years combined.

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

Technical market report for May 18, 2019.

The good news is: Seasonality has been strong for the next 6 weeks.


The Negatives

New lows remained at threatening levels all of last week.
Friday new lows came up just a little short of triggering a Hindenburg Omen.
The secondaries have been underperforming the blue chips.

The first chart covers the past 6 months showing the NASDAQ composite (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 vertical lines have been drawn on the 1st 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.

 OTC HL Ratio spent most of the week in negative territory and finished the week at a slightly negative 47%.

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

​​​​​The Positives

The all time highs for both the OTC & S&P 500 (SPX) 2 weeks ago were confirmed by most of the breadth indicators so new higher highs are likely.

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 went slightly negative last Monday before recovering to finish the week at a modestly positive 63%, up from last week’s close of 58%.  

Conclusion
Confirmations of the index highs two weeks ago imply higher prices ahead.  If deterioration of the breadth indicators along with lagging secondaries continues, we will have a good setup for a cycle top when the blue chip indices hit their likely new highs.

I expect the major averages to be higher on Friday May 24 than they were on Friday May 1. 

Last weeks positive forecast was a miss.

Good Luck,
Mike Burk
YTD W 9 / L 4 / T 6

Report for the 5 days before Memorial Day.
The number following the year represents its position in the Presidential Cycle.
The number following the daily return represents the day of the week;
1 = Monday, 2 = Tuesday etc.

OTC Presidential Year 3 (PY3)
               Day5       Day4       Day3       Day2       Day1       Totals
 1971-3      -0.40% 1   -0.85% 2    0.03% 3    0.07% 4    0.60% 5    -0.55%
 1975-3      -0.55% 1   -0.17% 2   -1.10% 3    0.75% 4    1.30% 5     0.24%

 1979-3       0.11% 1    0.56% 2    0.17% 3   -0.02% 4    0.44% 5     1.27%
 1983-3       0.10% 1    1.15% 2    0.59% 3    0.72% 4    0.21% 5     2.77%
 1987-3      -1.27% 1   -1.30% 2   -0.39% 3    0.47% 4   -0.26% 5    -2.76%
 1991-3      -0.27% 1    0.73% 2    0.76% 3    0.47% 4    0.63% 5     2.33%
 1995-3       0.76% 1    0.97% 2   -0.19% 3   -0.08% 4   -0.62% 5     0.85%

 Avg         -0.11%      0.42%      0.19%      0.31%      0.08%       0.89%

 1999-3      -2.63% 1   -2.97% 2    1.81% 3   -0.20% 4    2.12% 5    -1.87%
 2003-3      -2.97% 1   -0.11% 2   -0.08% 3    1.19% 4    0.17% 5    -1.81%
 2007-3       0.80% 1    0.36% 2   -0.42% 3   -1.52% 4    0.76% 5    -0.03%
 2011-3      -1.58% 1   -0.46% 2    0.55% 3    0.78% 4    0.50% 5    -0.21%
 2015-3       0.60% 1   -0.17% 2    0.03% 3    0.38% 4   -0.03% 5     0.81%

 Avg         -1.16%     -0.67%      0.38%      0.13%      0.70%      -0.62%

OTC summary for PY3 1971 - 2015
Averages     -0.61%     -0.19%      0.15%      0.25%      0.48%       0.09%
%Winners        42%        42%        58%        67%        75%         50%
MDD  5/25/1999  5.52% --  5/21/2003  3.16% --  5/20/1987  2.94%

OTC summary for all years 1971 - 2018
Averages     -0.07%     -0.14%      0.07%      0.25%      0.14%       0.24%
% Winners      47%        46%        60%        60%        60%         65%


SPX PY3
               Day5       Day4       Day3       Day2       Day1       Totals
 1971-3      -0.85% 1   -0.66% 2    0.12% 3   -0.19% 4    0.23% 5    -1.35%
 1975-3       0.11% 1   -0.51% 2   -1.12% 3    0.37% 4    1.33% 5     0.18%

 1979-3       0.21% 1    0.37% 2   -0.63% 3    0.05% 4    0.29% 5     0.29%
 1983-3       0.80% 1    1.29% 2    0.40% 3   -0.44% 4   -0.62% 5     1.44%
 1987-3      -0.27% 1   -2.45% 2   -0.50% 3    0.70% 4    0.71% 5    -1.81%
 1991-3      -0.03% 1    0.82% 2    0.22% 3   -0.32% 4    0.67% 5     1.37%
 1995-3       0.86% 1    0.94% 2    0.00% 3    0.00% 4   -0.93% 5     0.87%

 Avg          0.31%      0.20%     -0.10%      0.00%      0.02%       0.43%

 1999-3      -1.77% 1   -1.71% 2    1.59% 3   -1.79% 4    1.59% 5    -2.09%
 2003-3      -2.49% 1   -0.11% 2    0.40% 3    0.92% 4    0.14% 5    -1.14%
 2007-3       0.15% 1   -0.06% 2   -0.12% 3   -0.97% 4    0.55% 5    -0.46%
 2011-3      -1.19% 1   -0.08% 2    0.32% 3    0.40% 4    0.41% 5    -0.15%
 2015-3       0.30% 1   -0.06% 2   -0.09% 3    0.23% 4   -0.22% 5     0.16%

 Avg         -1.00%     -0.41%      0.42%     -0.24%      0.49%      -0.74%

SPX summary for PY3 1971 - 2015
Averages     -0.35%     -0.19%      0.05%     -0.09%      0.35%      -0.23%
%Winners        50%        33%        58%        50%        75%         50%
MDD  5/27/1999  3.68% --  5/20/1987  3.21% --  5/20/2003  2.60%

SPX summary for all years 1971 - 2018
Averages      0.02%     -0.05%     -0.02%      0.12%      0.09%       0.15%
% Winners      56%        48%        54%        54%        56%         63%
​​