Predicting The Unpredictable

Predicting The Unpredictable
Predicting The Unpredictable
Predicting The Unpredictable Getty Images

I really get the feeling something big and bad is going to happen to the equity markets. After the major stock indexes made all-time highs in January, they just can't seem to regain their footing.

While the old adage about “selling in May and walking away” has not led to a down May in 5 out of the last 6 years, it's still important to know that the 6 months from May to October are historically the worst months for the stock market. Even when the markets do not sell off, these months are not a very productive time; over the last 20 years, the S&P 500 has had an average gain of just 0.3% during that period.

Adding to that will be the summer trade, a host of problems from Trump investigations, tariffs, and the midterm elections in the fall, as well as the highest treasury yields in years. The weakest May-to-October period historically has been during the mid-term year of a presidential cycle.

 

Our View:

The pattern has been all about buying the early or mid-day sell-offs and selling the rallies as the two-sided trend continues. If the S&P 500 ( ESM18) takes out the 200-day moving average, currently at 2611, it could mean saying goodbye to the S&P 500 making any more new highs for this year, or even next year.

I know that getting bearish after a sell-off hasn’t worked very well lately, but the percentage of traders net-long in the S&P 500 is now at its highest since mid-April. As I have said many times recently, these markets go down when everyone gets too long and it goes up when everyone gets too short.  We lean toward selling rallies in the S&P 500 futures, as even the strong tech earnings from the last week have not been good enough to propel this market.

 

Today’s Economic Calendar:

Overnight, Asian stock markets were weak, followed by more selling in Europe. The economic calendar today is busy; the 9:45 and 10:00 a.m. EST numbers are the headline events with the most potential to affect the financial markets.

  • Weekly Bill Settlement
  • Challenger Job-Cut Report 7:30 AM ET
  • International Trade 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • PMI Services Index 9:45 AM ET
  • Factory Orders 10:00 AM ET
  • ISM Non-Mfg Index 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 3-Month Bill Announcement 11:00 AM ET
  • 6-Month Bill Announcement 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

 

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.