The good news is:
The market is oversold and ready for a bounce.
The NegativesThe first chart covers the last 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 continued its decline. 
The next chart is similar to the 1st one except it shows the OTC in blue and OTC NH in green has been calculated with NASDAQ data. OTC NH after failing to confirm the new index high OTC NH continued its decline. 
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). OTC NL continued to move downward last week. 
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 moving sharply downward. 
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 (equal numbers of new highs and new lows).OTC HL Ratio fell to near its level at the early August low. 
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 fell to its lowest level in over a year. 
The PositivesThe market is oversold.This one is a bit esoteric.It shows The Russell 2000 (R2K) in pink and momentum of the 40% trend of the ratio of advancing issues divided by advancing issues + declining issues on the NYSE (NY AD Ratio 40% MoM 7) in green.NY AD Ratio 40% MoM 7 has been doing a good job of identifying short term lows recently and it turned sharply upward on Friday. 
SeasonalityNext week includes 2 trading days prior to Christmas and 2 trading days following Christmas 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 1953 to 2023. There are summaries for both the 4th 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.There are a lot of “0’s” in the table because there is often no 4th Friday in December. The record has been modestly positive in most years, but weaker during the 4th year of the Presidential Cycle than other years. Report for the week before the 4th Friday of December.The number following the year is the position in the Presidential Cycle.Daily returns from Monday through the 4th Friday. OTC Presidential Year 4 (PY4) Year Mon Tue Wed Thur Fri Totals 1968-4 0.09% -0.31% 0.00% -0.41% -0.01% -0.64% 1972-4 -0.74% -0.11% -0.35% -0.64% 0.15% -1.69% 1976-4 0.48% 0.56% 0.07% 0.79% 0.86% 2.76% 1980-4 0.95% 0.04% 0.14% 0.00% 0.57% 1.69% 1984-4 0.63% 0.00% 0.10% -0.17% 0.18% 0.74% Avg 0.28% 0.04% -0.01% -0.11% 0.35% 0.57% 1988-4 0.16% -0.09% -0.12% 0.24% 0.22% 0.41% 1992-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1996-4 -0.71% 0.63% 0.00% 0.54% -0.25% 0.22% 2000-4 -1.09% -4.30% -7.12% 0.31% 7.56% -4.63% 2004-4 -0.30% 1.07% -0.01% 0.06% -0.13% 0.69% Avg -0.48% -0.67% -2.42% 0.29% 1.85% -0.83% 2008-4 -2.04% -0.71% 0.22% 0.00% 0.35% -2.18% 2012-4 -0.28% 0.00% -0.74% -0.14% -0.86% -2.02% 2016-4 0.37% 0.49% -0.23% -0.44% 0.28% 0.47% 2020-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% OTC summary for PY4 1968 – 2020 Avg -0.21% -0.27% -0.80% 0.01% 0.74% -0.35% Win% 50% 50% 40% 50% 67% 58% OTC summary for all years 1963 – 2023 Avg -0.25% -0.02% 0.12% 0.20% 0.39% 0.39% Win% 44% 45% 58% 64% 73% 62%
SPX PY4 Year Mon Tue Wed Thur Fri Totals 1956-4 0.00% 0.00% 0.04% -0.09% 0.45% 0.41% 1960-4 -0.12% -0.07% 0.81% -0.28% 0.09% 0.42% 1964-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1968-4 -1.06% -0.16% 0.00% 0.10% -0.39% -1.51% 1972-4 -1.15% -0.48% -0.34% -0.72% 0.63% -2.06% 1976-4 1.16% 0.67% -0.40% 0.51% 0.54% 2.48% 1980-4 1.56% -0.35% 0.43% 0.00% 0.51% 2.14% Avg 0.13% -0.08% -0.10% -0.04% 0.32% 0.26% 1984-4 0.76% 0.00% -0.17% -0.43% 0.31% 0.46% 1988-4 0.95% -0.52% -0.03% -0.18% 0.36% 0.58% 1992-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1996-4 -0.26% 0.55% 0.00% 0.64% 0.13% 1.06% 2000-4 0.81% -1.30% -3.13% 0.80% 2.44% -0.38% Avg 0.56% -0.42% -1.11% 0.21% 0.81% 0.43% 2004-4 -0.43% 0.72% -0.01% 0.01% -0.13% 0.15% 2008-4 -1.83% -0.97% 0.58% 0.00% 0.54% -1.69% 2012-4 -0.24% 0.00% -0.48% -0.12% -1.10% -1.95% 2016-4 0.20% 0.36% -0.25% -0.19% 0.13% 0.25% 2020-4 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Avg -0.58% 0.04% -0.04% -0.10% -0.14% -0.81% SPX summary for PY4 1956 – 2020 Avg 0.03% -0.14% -0.25% 0.00% 0.32% 0.03% Win% 46% 36% 33% 42% 79% 64% SPX summary for all years 1953 – 2023 Avg -0.17% 0.03% 0.28% 0.16% 0.21% 0.43% Win% 39% 49% 65% 60% 71% 69% ConclusionThe only chart in the positive group suggests, at least, a short term rally. Seasonality has been modestly positive.The strongest sectors last week were Internet (for the 3rd week in a row) and Telecom while the weakest were Banks and Basic Materials.I expect the major averages to be higher on Friday December 27 than they were on Friday December 20. Last weeks positive forecast was a miss.More By This Author:Technical Market Report For December 14, 2024 Technical Market Report For December 7, 2024 Technical Market Report For November 30, 2024
