Market at a Glance - 5/31/2016
By: Christopher Mistal
May 31, 2016
5/27/2016: Dow 17873.22 | S&P 2099.06 | NASDAQ 4933.50 | Russell 2K 1150.45 | NYSE 10469.52 | Value Line Arith 4658.45
Psychological: Muddled. According to the most recent Investor’s Intelligence Advisor Sentiment survey, bearish advisors ticked up to 24.0%. Correction advisors stand at 40.6% and Bullish advisors are just 35.4%. However, this reading was from before last week’s advance. Last week’s CBOE Put/Call ratio hit its lowest level since December which indicates a higher level of bullish sentiment than Advisor Sentiment suggested. Lacking clarity, the market will likely continue to bounce around in a range as neither bulls nor bears can seem to maintain control for any extended period of time.
Fundamental: Mixed. The labor market remains on seemingly firm ground although weekly initial jobless claims have climbed recently. Q1 GDP was revised higher and consumer spending picked up at the fastest pace in six years in April. Corporate profits, ex-energy were better than expected in Q1 however, they did decline from year-ago levels. U.S. stocks are still within a few percentage points of all-time highs. But Q2 growth is still expected to be a tepid 2.9% and the Fed has its finger on the rate-hike button.
Technical: Range bound? After failing at resistance below last year’s all-time highs in April, DJIA and S&P 500 tested their April lows and bounced. S&P 500 was first to return to resistance around 2100 and stall. DJIA’s bounce was subdued and still has some upside potential before it hits resistance. NASDAQ has not even reached its highs from last December and continues to lag. A break of May’s lows could lead to a retest of January/February lows while a breakout by DJIA and S&P 500 and NASDAQ is needed to snap the market out of its year-plus funk.  
Monetary: 0.25-0.50%. Seemingly over optimistic rate-hike expectations have been called into question with Fed minutes and officials frequently citing June is “on the table” in recent weeks. As a result the dollar has firmed and gold and Treasury bonds have weakened. Notions of the Fed waiting until after elections in November are also unfounded. The Fed has increased rates in the past ahead of elections.
Seasonal: Neutral. 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 election years, June performance does improve. June is the #1 S&P 500 month in election years, #4 DJIA and NASDAQ, #5 Russell 2000.