The good news is:
The small cap indices outperformed the large cap indices by a large margin last week.
The NegativesThe first chart covers the last 6 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. OTC NH failed to confirm the all time index high a few weeks ago. 
The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH in green has been calculated with NYSE data. NY NH also failed to confirm the SPX all time high.
The PositivesThe 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 (equal numbers of new highs and new lows).OTC HL Ratio remained in positive territory in spite of a rough week for the index.
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 held up well in spite of a rough week for the SPX.
The next chart covers the past 6 months showing the OTC in blue and a 10% trend (19 day EMA) of NASDAQ new lows (OTC NL) in brown. OTC NL has been plotted on an inverted Y axis so decreasing numbers of new lows move the indicator upward (up is good). New lows remained at low levels in spite of the index falling.
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.NYSE new lows continued to decline while the SPX was falling.
Summation indices are running totals of oscillator values.Short term momentum indicators applied to summation indices make them nearly binary.The next chart covers the past 6 months showing the SPX in red and momentum of summation indices of oscillators of advancing and declining issues, new highs and new lows and upside and downside volume on the NYSE. NY SI MoM’s all declined, however the decline was arrested Friday.
The next chart shows just the last 2 months of the previous chart so you can see more clearly what is happening.
The next chart is similar to the NYSE chart above; except it shows the OTC, in blue and the SI MoM’s have been generated from NASDAQ breadth data. OTC SI MoM’s have turned downward. 
The next chart shows the last 2 months of the previous chart. OTC HL SI Mom has remained at the top of the chart.
SeasonalityNext week includes the last 3 trading days of July and the first 2 trading days of August during the 4th 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 2023 while SPX data runs from 1928 to 2023. There are summaries for both the 4th year of the Presidential Cycle and all years combined. Average returns for the coming week have been positive by all measures and stronger during the 4th year of the Presidential Cycle than other years. Report for the last 3 days of July and first 2 days of August.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 4 (PY4) Day3 Day2 Day1 Day1 Day2 Totals 1964-4 0.02% 3 0.05% 4 0.10% 5 0.05% 1 -0.29% 2 -0.07% 1968-4 -1.41% 5 0.21% 1 -1.28% 2 -0.32% 4 -0.19% 5 -2.99% 1972-4 -0.23% 4 -0.16% 5 -0.31% 1 0.55% 2 0.73% 3 0.58% 1976-4 -0.32% 3 -0.18% 4 0.48% 5 -0.02% 1 0.81% 2 0.78% 1980-4 0.61% 2 0.74% 3 -0.30% 4 0.40% 5 -0.35% 1 1.10% Avg -0.26% 0.13% -0.26% 0.13% 0.14% -0.12% 1984-4 0.99% 5 -0.15% 1 0.33% 2 1.59% 3 2.37% 4 5.12% 1988-4 -0.64% 3 0.20% 4 0.85% 5 0.17% 1 -0.05% 2 0.53% 1992-4 1.03% 3 0.23% 4 0.35% 5 0.26% 1 -0.18% 2 1.69% 1996-4 -1.20% 1 0.52% 2 0.80% 3 1.68% 4 2.38% 5 4.18% 2000-4 -3.65% 4 -4.66% 5 2.84% 1 -2.16% 2 -0.73% 3 -8.37% Avg -0.69% -0.78% 1.03% 0.31% 0.76% 0.63% 2004-4 -0.58% 3 1.23% 4 0.33% 5 0.25% 1 -1.73% 2 -0.49% 2008-4 2.45% 2 0.44% 3 -0.18% 4 -0.63% 5 -1.10% 1 0.98% 2012-4 2.24% 5 -0.41% 1 -0.21% 2 -0.66% 3 -0.36% 4 0.60% 2016-4 0.58% 3 0.30% 4 0.14% 5 0.43% 1 -0.90% 2 0.55% 2020-4 1.35% 3 0.43% 4 1.49% 5 1.47% 1 0.35% 2 5.08% Avg 1.21% 0.39% 0.31% 0.17% -0.75% 1.34% OTC summary for PY4 1964 – 2020Averages 0.08% -0.08% 0.36% 0.20% 0.05% 0.62%% Winners 53% 67% 67% 67% 33% 73%MDD 8/2/2000 8.26% — 8/2/1968 2.96% — 8/4/2008 1.90% OTC summary for all years 1963 – 2023Averages -0.03% 0.04% -0.01% 0.00% -0.19% -0.19%% Winners 46% 62% 51% 53% 39% 51%MDD 8/2/2000 8.26% — 8/2/2002 7.16% — 8/4/1998 6.98%
SPX PY4 Day3 Day2 Day1 Day1 Day2 Totals 1928-4 0.26% 6 0.00% 1 -0.21% 2 -0.05% 3 -0.46% 4 -0.46% 1932-4 3.17% 4 3.08% 5 1.16% 6 0.16% 1 -3.93% 2 3.65% 1936-4 5.56% 3 0.38% 4 -1.06% 5 0.13% 6 0.25% 1 5.25% 1940-4 0.70% 1 2.48% 2 -0.39% 3 -0.29% 4 -0.10% 5 2.40% 1944-4 -0.55% 5 0.00% 6 0.08% 1 0.55% 2 0.23% 3 0.32% 1948-4 -0.68% 3 -0.80% 4 -1.25% 5 0.00% 1 0.32% 2 -2.41% 1952-4 0.24% 2 0.44% 3 0.12% 4 0.20% 5 -0.08% 1 0.91% 1956-4 -0.81% 5 -0.16% 1 0.80% 2 0.06% 3 0.65% 4 0.53% 1960-4 -0.62% 3 0.74% 4 1.72% 5 0.04% 1 -0.88% 2 0.99% Avg -0.48% 0.04% 0.29% 0.17% 0.05% 0.07% 1964-4 0.08% 3 0.21% 4 0.11% 5 -0.22% 1 -1.25% 2 -1.07% 1968-4 0.41% 5 -0.70% 1 0.09% 2 -0.47% 4 -0.67% 5 -1.34% 1972-4 -0.23% 4 0.09% 5 0.01% 1 0.94% 2 0.82% 3 1.63% 1976-4 -0.42% 3 -0.12% 4 0.50% 5 -0.24% 1 0.92% 2 0.64% 1980-4 0.80% 2 -0.14% 3 -0.46% 4 -0.38% 5 -0.19% 1 -0.37% Avg 0.13% -0.13% 0.05% -0.07% -0.07% -0.10% 1984-4 0.74% 5 -0.66% 1 0.31% 2 2.27% 3 2.54% 4 5.20% 1988-4 -1.01% 3 1.34% 4 2.26% 5 0.07% 1 -0.06% 2 2.60% 1992-4 1.13% 3 0.40% 4 0.07% 5 0.21% 1 -0.17% 2 1.63% 1996-4 -0.79% 1 0.69% 2 0.74% 3 1.58% 4 1.92% 5 4.13% 2000-4 -0.19% 4 -2.05% 5 0.77% 1 0.51% 2 0.04% 3 -0.92% Avg -0.03% -0.06% 0.83% 0.93% 0.85% 2.53% 2004-4 0.05% 3 0.46% 4 0.12% 5 0.44% 1 -0.63% 2 0.45% 2008-4 2.34% 2 1.67% 3 -1.31% 4 -0.56% 5 -0.90% 1 1.23% 2012-4 1.91% 5 -0.05% 1 -0.43% 2 -0.29% 3 -0.75% 4 0.39% 2016-4 -0.12% 3 0.16% 4 0.16% 5 -0.13% 1 -0.64% 2 -0.56% 2020-4 1.24% 3 -0.38% 4 0.77% 5 0.72% 1 0.36% 2 2.71% Avg 1.08% 0.37% -0.14% 0.04% -0.51% 0.84% SPX summary for PY4 1928 – 2020Averages 0.55% 0.29% 0.19% 0.22% -0.11% 1.15%% Winners 58% 54% 71% 58% 42% 71%MDD 8/2/1932 3.93% — 8/4/2008 2.74% — 7/30/1948 2.70% SPX summary for all years 1928 – 2023Averages 0.10% 0.15% 0.06% 0.09% -0.04% 0.34%% Winners 50% 61% 60% 51% 49% 58%MDD 7/31/1933 6.84% — 8/4/1998 6.19% — 8/2/2011 5.85% AugustAugust, during the 4th year of the Presidential Cycle, has been, on average, the strongest month of the year.Since 1963, over all years, the OTC in August has been up 59% of the time with an average gain of 0.4%. During the 4th year of the Presidential Cycle August has been up 73% time with an average gain of 3.0%. The best August ever for the OTC was 2000 (+11.7%), the worst 1998 (-19.9%).The average month has 21 trading days. The chart below has been calculated by averaging the daily percentage change of the OTC for each of the 1st 11 trading days and each of the last 10. In months when there were more than 21 trading days some of the days in the middle were not counted. In months when there were less than 21 trading days some of the days in the middle of the month were counted twice. Dashed vertical lines have been drawn after the 1st trading day and at 5 trading day intervals after that. The line is solid on the 11th trading day, the dividing point. In the chart below the red line shows the average of the OTC in August over all years since 1963 while the blue line shows the average during the 4th year of the Presidential Cycle over the same period.
Since 1928 the SPX has been up 58% of the time in August with an average gain of 0.6%. During the 4th year of the Presidential Cycle the SPX has been up 71% of the time with an average gain of 3.0%. The best August for the SPX was 1932 (+37.5%) the worst 1998 (-14.6%).The chart below is similar to the one above except it shows the daily average performance over all years for the SPX in August in red and the performance during the 4th year of the Presidential Cycle in green. 
Since 1979 the Russell 2000 (R2K) has been up 56% of the time in August with an average gain of 0.1%. During the 4th year of the Presidential Cycle the R2K has been up 73% of the time with an average gain of 3.5%. The best August ever for the R2K, 1984 (+11.5%), the worst 1998 (-19.5%)The chart below is similar to those above except it shows the daily performance over all years of the R2K in August in magenta and the performance during the 4th year of the Presidential Cycle in green.Since 1885 the DJIA has been up 64% of the time in August with an average gain of 1.2%. During the 4th year of the Presidential Cycle the DJIA has been up 67% of the time in August with an average gain of 2.5%. The best August ever for the DJIA 1932 (+34.8%), the worst 1998 (-15.1%)The chart below is similar to those above except it shows the daily performance over all years of the DJIA in August in grey and the performance during the 4th year of the Presidential Cycle in blue.
ConclusionPrice wise last week was interesting. For the 2nd week in a row the price weighted Dow Jones Industrial Average (the bluest of the blue), and the small cap Russell 2000 were both up while the cap weighted OTC and SPX were down. The breadth indicators were strong. The strongest sectors last week were Utilities (for the 2nd week) and Banks while the weakest were Electronics (for the 2nd week) and Precious Metals.I expect the major averages to be higher on Friday August 2 than they were on Friday July 26. Last week the DJIA and Russell 2000 were up while OTC and SPX were down; so I am calling last weeks negative forecast a tie. More By This Author:Technical Market Report For July 20, 2024 Technical Market Report For July 13, 2024 Technical Market Report For July 6, 2024
