Seasonal MACD Update & Late-April S&P 500 Rally
By: Christopher Mistal
April 20, 2017
As of the today’s close, the faster moving MACD “Buy” applied to DJIA and S&P 500 was still negative. The MACD “Buy” indicator applied to S&P 500 will be positive with any gain tomorrow and would also turn positive as long as S&P 500 does not decline more than 11.36 points (–0.48%). DJIA’s MACD Buy indicator will be positive tomorrow with a gain of at least 6.86 points (0.03%).
[DJIA Daily Bar Chart]
[S&P 500 Daily Bar Chart]
Continue to hold long positions associated with DJIA’s and S&P 500’s “Best Six Months.” We will issue our Seasonal MACD Sell signal when corresponding MACD Sell indicators applied to DJIA and S&P 500 both crossover and issue a new sell.
Late April Long S&P 500 Trade
The best six months for owning stocks can begin in October or early November and usually lasts until April or early May for DJIA and S&P 500. However, seasonal strength for technology stocks, measured by NASDAQ, tends to last until June (“Best Eight Months”, see page 60 Stock Trader’s Almanac 2017). Due to its substantial weighting in technology, the S&P 500 also demonstrates a tendency to rally from late April until early June.
[S&P 500 (SP) Continuous Contract Daily Bar Chart & 1-Yr Seasonal Pattern]
This trade has been profitable 62.9% of the time over the longer-term however; its recent track record has been rough, declining seven times in the last eleven years. Going long the September futures contract on or about April 27 and holding until on or about June 7 has worked 23 times in 35 years. The key to this trade is overall market trend and proper trade management as numerous sizable losses and gains have occurred over the trade’s history. This is a shorter-term trade, for nimble traders, and is not related to our Seasonal Switching Strategy. Recent weakness has set this trade up for a potential win this year. In the S&P 500 chart at the beginning of this Alert, you can see that monthly support (green dashed line indicated by upper blue arrow) has held and today’s gains have turned the Stochastic indicator positive and moved both MACDs very close to turning positive.
[S&P 500 September Futures Contract – Trade History]
There are several ways to take advantage of this Spring rally. One is through the futures markets traded at the CME. Stock traders may wish to explore trading SPDR S&P 500 (SPY), which allows one to use options. The length of time this seasonality is in play makes leveraged ETFs like ProShares Ultra S&P500 (SSO) worth consideration as well. SSO could be considered on dips below $84.30. If purchased, an initial stop loss of $82.40 is suggested. This is just below SSO’s recent intra-day low of $82.48 on April 13. If purchased, we will look to take profits when SSO trades above $87 or when we issue our Seasonal MACD Sell signal. This trade will be tracked in the Almanac Investor ETF Portfolio, updated below. 
[ProShares Ultra S&P500 (SSO)]
ETF Portfolio Update
Put bluntly, April 2017 has been a dud for the market, at least prior to today. Historically, April has a sound reputation for gains. It’s the first month of a new quarter, the last month of the “Best Six Months” and generally the market rallies in response to earnings. This April the market has been held in check by some mixed data and earnings, the Fed and its desire to tighten monetary policy and a seemingly endless list of geopolitical and domestic concerns. Quite a “wall of worry” has been constructed to impede the market’s progress. But, the market appears to be ready to begin climbing that wall once again with solid across the board gains today.
In the time since last update iShares 20+ Year Bond (TLT) short trade has been stopped out. It was covered using its average price of $123.94 on April 19, the day after it closed above its stop of $124.25. DB Gold Double Short (DZZ) was closed out of the portfolio today when it traded above $6.00.
Although erroneously overlooked during the last update, CurrencyShares British Pound (FXB) long trade from our March 7, 2017 Seasonal Sector Trades Alert now appears in the portfolio table below. The main driver for this seasonal trade, the end of Britain’s fiscal year, was aided by Brexit concerns this time around and FXB is currently up 5.1%. The favorable seasonality behind this trade typically comes to an end now, but recent strength by the pound has traced out bullish a 1-2-3, “W” bottom pattern when FXB closed above its December high earlier this week. Instead of outright selling FXB is on Hold and its stop loss has been increased to $124.50. This should give FXB an opportunity to see if the breakout can hold and deliver further gains.
All long positions remain on hold. Please see table below for updated stop losses and current advice.
[Almanac Investor ETF Portfolio – April 19, 2017 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in FXB, IWM, IYT, QQQ, SPY, VNQ, XLB, XLE, XLP, XLV and XLY.