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.
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