The good news is:

There are a couple days left in the seasonally strong period we have been enjoying.

The Negatives

New lows declined significantly last week, but remain at threatening levels.

The first chart covers the past 6 months showing the Nasdaq composite (OTC) in blue and a 10% trend of Nasdaq new lows (OTC NL) in brown.  OTC NL has been plotted on an inverted Y axis so diminishing numbers of new lows move the indicator upward (up is good).

This is what a bottom should look like. Unfortunately, this is likely to be a seasonally induced bounce.  It will be a week or so before we know for sure.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NL, in blue, has been calculated with NYSE data.

The pattern is similar to the chart above.

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

There was some recovery in this indicator, although new lows decreased significantly, they exceeded new highs every day last week.

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.

There was also a nice recovery In OTC HL Ratio, but new highs never exceeded new lows.

The Positives

Seasonally the first few days of November are strong and the rest of the month ok. Tuesday’s election will make Wednesday’s market action interesting.

Seasonality

Next week includes the 5 trading days of prior to the 2nd Friday of November 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 7 days a week so that data has been ignored.

Average returns for the coming week have been modestly positive by all measures.