The seasonal patterns for October and yearend are fairly constructive, however seasonality is only one facet of broad market evaluation and the load of the proof stays bearish.
The histogram under exhibits the seasonal patterns for the S&P 500 during the last twenty years. 5 of the twelve months stand out as a result of they closed larger greater than 70% of the time (April, Could, July, November and December). October is the sixth strongest month of the 12 months as a result of it closed larger 65% of the time. Not dangerous, however this additionally means October closed decrease 35% of the time.
Despite the fact that October has constructive expectations and November-December are even stronger, I’m placing seasonal patterns on the again burner as a result of the tape is bearish and the Fed is tightening. I wager lots of you possibly can guess what I’m going to say subsequent! Do not combat the tape or the Fed. This phrase, which was coined by the late Marty Zweig, is as prevalent right this moment because it was within the 80s. Sure, the 80s are again! The tape is bearish as a result of the S&P 500 is in a downtrend. This key benchmark is under the falling 200-day SMA and the Pattern Composite has been adverse since April nineteenth.
The underside window exhibits the Efficient Fed Funds Charge ($$FEDRATE) turning up in March and stair-stepping larger since. Charges are rising sharply so being bullish now can be combating the Fed. I might additionally be aware that the stability sheet has been contracting since April. Despite the fact that I’m displaying Fed Funds right here, I might be watching the 10-yr Treasury Yield for the primary indicators of a change in Fed coverage as a result of the bond market tends to guide the Fed.
Bullish seasonal patterns might produce a counter-trend bounce or consolidation as a result of the S&P 500 turned fairly oversold just lately, however the index stays in a long-term downtrend and the Fed continues to be in tightening mode. No one is aware of when the bear market will finish or how far it is going to prolong. One of the best we will do is settle for the proof and commerce accordingly till it modifications. Personally, I might be watching the breadth thrust indicators which are a part of the TrendInvestorPro Composite Breadth Mannequin, which has been bearish since April eleventh. Click on right here for quick entry to our timing mannequin, ETF stories, complete movies and ETF Pattern/Rank desk.
The Pattern Composite, Momentum Composite, ATR Trailing Cease and eight different indicators are a part of the TrendInvestorPro Indicator Edge Plugin for StockCharts ACP. Click on right here to be taught extra and take your evaluation course of to the following stage.
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic method of figuring out pattern, discovering indicators inside the pattern, and setting key worth ranges has made him an esteemed market technician. Arthur has written articles for quite a few monetary publications together with Barrons and Shares & Commodities Journal. Along with his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Enterprise Faculty at Metropolis College in London.
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