Seasonal:
Neutral. Stock Trader’s Almanac Seasonal MACD Sell Signal for DJIA and S&P 500 triggered April 7. May is the first month of DJIA & S&P 500 “Worst Six Months,” but NASDAQ’s “Best Eight Months” lasts through June. Average May gains; DJIA –0.01%, S&P 500 500 0.2% (since 1950), NASDAQ 1.0% (since 1971). In past midterm years average performance has been negative. May is the second worst month for S&P 500 in midterm years since 1950. However, DJIA and S&P 500 have advanced in 8 of the last 9 Mays.
Fundamental:
Murky. Russia and Ukraine are still at war. Inflation is still running at multi-decade highs. Supply chain disruptions persist as China battles covid resurgences with lockdowns. The advance estimate of Q1 GDP was –1.4% annual rate. Post-pandemic growth has slowed, and the Fed is raising interest rates. Positively, inside the negative Q1 GDP, personal consumption expenditures, nonresidential and residential investments increased. Employment data also remains firm with claims data hovering around multi-decade lows and the unemployment rate was 3.6%.
Technical:
Bouncing? For the majority of April DJIA, S&P 500 and NASDAQ have been under pressure. All three have fallen back below their respective 50- and 200-day moving averages. February 24 intraday lows have held for DJIA and S&P 500. NASDAQ did sink below its February and mid-March low but is snapping back. Resistance looms above at the declining 50-day moving average and then the 200-day moving average for all three indexes.
Monetary:
0.25% – 0.50%. Recent Fed comments have shifted market expectations toward a 0.50% increase in the Fed Funds Rate at its upcoming meeting scheduled for next week. Full-year expectations have also become more aggressive and currently point to rates being around 3% within one year. Rates are going up and have been in anticipation of the Fed. In addition to rates, further clarity surrounding the Fed’s massive balance sheet is needed. Supply chain issues also remain that could hamper the Fed’s efforts to tame inflation.
Psychological:
Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors have inched up to 34.2%. Correction advisors stood at 32.9% while Bearish advisors numbered 32.9% as of their April 27 release. A modest decrease in bears appears consistent with the markets trading action and the timing of the survey. Overall sentiment is likely to remain essentially neutral as the February intraday lows have not been broken by DJIA and S&P 500 while the outright bullish case remains challenged.
MAY
2022