Bearish. June is the last month of NASDAQ’s “Best Eight Months.” NASDAQ’s Seasonal MACD Sell signal can occur as soon as June 1. In midterm years, June really struggles. June is #12 DJIA and S&P 500 #10 for NASDAQ with average monthly gains ranging from -1.6% to -1.9%.
Resolute. Market volatility this year has reminded everyone that the market does not always go straight up in a nice predictable path. This has not deterred many from remaining bullish. According to Investor’s Intelligence Advisors Sentiment survey bulls are at 50.0%. Correction advisors are down to 30.8% and Bearish advisors are just 19.2%. The recent increase in bullish sentiment has coincided with broad market strength and will likely fade just as quickly should the market falter for more than just a few days.
Firm. Most incoming data suggests the economy is on firm ground. The labor market appears tight with unemployment at 3.9%, but labor force participation is still well below its all-time high. Growth forecasts for the current quarter remain strong with Atlanta Fed GDPNow model forecasting 4.7%. Corporate profits are firm as well. Risks include protectionist policy (new tariffs), renewed European Union concerns (Italy) and midterm elections. It is always a good idea to be aware of what could happen, just don’t lose sight of what is happening.
Range bound. Until DJIA, S&P 500, and NASDAQ all make higher highs or lower lows this best describes their recent trading. Recent NASDAQ strength is encouraging, but NASDAQ alone cannot pull the broader market higher. Mid-May’s breakout above April’s high by DJIA and S&P 500 is increasingly looking like a fake out. Key support remains right around each index’s 200-day moving average.
1.50-1.75%. May’s Fed meeting came and went with little drama. Interest rates were left unchanged, inflation was seen running near target and labor market conditions remain firm. Currently, there is an 83.8% chance of a rate hike at the June meeting based upon the CME Group’s FedWatch Tool. Rates are still quite accommodative to continued growth within historical context.