tsptalk's Market Talk

[tsptalk]

The first seasonal trend I ever learned
2023-05-30 | Jay Kaeppel

A little-known seasonal trend arguing for more

The rhetorical question is, "Can the rally that started in October 2022 continue through the end of 2025?" It sounds pretty ridiculous, I admit. And no, that is not a prediction.

Still, hear me out.

The truth is I don't remember where I first read about the seasonal trend I am about to discuss. Well, technically, I do. It was in the Des Plaines library in mid-1982, where I often spent my lunch hour digesting whatever stock market information I could find. But when I say I don't remember "where," I mean I don't remember the actual source I read about it from. That is probably partly because, at the time I read it, I thought it was the dumbest thing I'd ever read. But as a numbers geek - er, I mean, Student of the Market - I did what I always did a lot at the time - I jotted it down so I could come back later and see how it worked out.

It turns out, I'm glad I did.

The trend? (I hope you're sitting down):

Every 20 years, the 39-month period that extends from September 30th of the Year ending in 2 (1902, 1922, 1942, etc.) through December 31st of the Year ending in 5 (1905, 1925, 1945, etc.) has been bullish for the stock market.

I know, I know. It's the dumbest thing you've ever read, right? I know because I had the exact same reaction. It's ridiculous.......

More: https://users.sentimentrader.com/users/sentimentedge/the-first-seasonal-trend-i-ever-learned

 

[tsptalk]

Once again the jobs data estimates were way off. The market seems to like the +339,000 report, but that sounds inflationary so it is more likely that the futures are applauding the rise in the unemployment rate to 3.7%, which is above the 3.5% expected, and that may keep the Fed off the rate hike train later this month. Estimates were looking for a gain of 190,000 jobs.

 

[tsptalk]

Breakouts, or fake out? Selling big 2-day rallies has been the trend in recent months. But today we see some breakouts. Is it different this time?

 

[tsptalk]

Breakouts, or fake out? Selling big 2-day rallies has been the trend in recent months. But today we see some breakouts. Is it different this time?

With authority.

 

[tsptalk]

S-fund: 200-day EMA held on an early pullback test. There is still an open gap below the average.

 

[tsptalk]

S&P 500 (C) is down slightly to start the day, small caps (S) are up modestly, and the I-fund is flat - as is the dollar.

The 10-year yield is up pushing bonds and the F-fund down.

It's early but the drag on the large cap indices is Apple, which is down again, and the small caps are taking advantage as money flows that way.

There's an open gap below on the S-fund chart, but so far the 200-day EMA is holding, and perhaps starting a new bull flag?

 

[tsptalk]

The final straggler is trying to breakout again. Or is it another fake out?

 

[tsptalk]

A quiet start to Thursday's trading. Yields and the dollar are down after jobless claims came in a little higher than expected.

Small caps are lagging and the pullback in the dollar is helping the I-fund lead to start the day as EFA is up about a half of a percent in early trading.

The Transports are pulling back some after yesterday's big rally and possible breakout.

 

[tsptalk]

Large caps are doing their thing again with the S&P 500 and Nasdaq up solidly this morning, but once again we have bifurcated action with small caps flat and the Transportation Index down so far.

 

[nasa1974]

Large caps are doing their thing again with the S&P 500 and Nasdaq up solidly this morning, but once again we have bifurcated action with small caps flat and the Transportation Index down so far.

Come on "S" fund. Show a little green to end the week.

 

[tsptalk]

There's plenty of trading time left in the day, but as of now we're seeing a negative sore thumb look on the S&P 500.

 

[nasa1974]

The "S" fund couldn't finish the week in the green, but it wasn't a bad week overall.

 

[tsptalk]

Stocks are up modestly with small caps leading.

Yields up and the dollar is up. The rising dollar may be a clue. More on that in today's commentary.

Oil is getting crushed today (down 3-4%)... while the 10-year yield is up. Must be a supply issue because these tend to move together when it's about the economy.

Financials are down although the smaller Regional Banks are up (KRE).

CPI tomorrow. PPI and the Fed on Wednesday. Will they or won't they raise rates? The probability has fallen from 30% on Friday, to just 20% today.

 

[tsptalk]

The probability of a 0.25% rate hike tomorrow dropped from 21% late yesterday to 7% after the CPI report.

Inflation / prices are still going up... and they are going up faster than we'd seen for many years pre-COVID. They just aren't going up as fast as they were last year. So don't be fooled. The Fed is still not happy with 4% inflation despite it sounding a whole lot better than 9%. But they have raised rates dramatically and they probably do need to pause and see how the delaying effects of prior hikes play out before continuing to plow higher.

Consumer Price Index (CPI)

 

[tsptalk]

The I-fund is back leading after the recent pullback in the dollar. The question is, is the dollar pulling back (to support at the 50-dy EMA) or breaking down? That's a big difference for the I-fund.

If that's a bull flag, the dollar is likely to pop back up and give the I-fund some trouble. If it breaks down through the 50-day EMAs, the the I-fund may sail through the end of the month.

The Fed will certainly have its input today.

 

[tsptalk]

The beat goes on, to start Thursday morning.

More gains in stocks. The dollar is down sharply again. Yields are down / Bonds and the F-fund up, but up against resistance.

The Transports are rocking and rolling again.

Oil and NatGas are up with the dollar getting beat up recently, but gold and silver are down.

Tomorrow is quadruple witching expiration day.

F-fund:

 

[tsptalk]

The VIX is up 4% today? :scratchchin:

 

[nasa1974]

The VIX is up 4% today? :scratchchin:

Is that a good thing or a bad thing with all the major markets in the green.

 

[tsptalk]

It could be related to options expiration tomorrow, but in general when the VIX is moving higher it means investors are paying more for protection because they expect more volatility ahead.

 

[nasa1974]

Is that a good thing or a bad thing with all the major markets in the green.

Right. Usually, you see a positive VIX when the rest of the market is deep in red. Just odd that everything was green today.