Market at a Glance

Market at a Glance - 5/30/2017

By: Christopher Mistal

May 30, 2017

Psychological: Fading. According to the most recent Investors Intelligence Advisors Sentiment survey bulls have slipped to 51.9% from 58.1% in the prior week, bears inched higher to 18.3% and correction is up to 29.8%. These readings are from May 23 and last week’s gains may have given a bump to the bulls. Aside from one week in March, bulls have been above 50% since last November. Back then was a great opportunity for new long positions, now is not.

Fundamental: Mixed. Corporate earnings are a bright spot as is the labor market, but there are still areas in need of improvement. Labor force participation is soft and economic growth seems to be hit or miss. Q1 GDP was a miss while Q2 is now forecast to be a hit with Atlanta Fed’s GDPNow model forecasting 3.8%. The Trump administration also remains a wild card. Will it come through on its campaign promises or at least some watered down version? At this point, it remains a coin toss and a potential major disappointment.

Technical: Topping? Last month it was NASDAQ and Russell 2000 that broke out to new highs. Now it is S&P 500 and NASDAQ. Since March 1, only NASDAQ has made a meaningful move higher and held the gains. S&P 500 is undoubtedly benefiting from its technology exposure, but absent DJIA, the transports and small-caps, NASDAQ will likely fail to continue much higher. Sporadic and marginal new highs by the indices look like the market is tracing out a possible top.

Monetary: 0.75-1.00%. At its May meeting, the Fed elected to hold rates steady, but the CME Group’s FedWatch Tool is currently indicating an 88.8% probability that the Fed funds rate will be going up after June’s meeting. Inflation running below target, tepid/sporadic economic growth and a massive balance sheet are major challenges the Fed is facing. Any misstep could have significant consequences to the market and the economy.

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 post-election years, June struggles. June is #10 DJIA and S&P 500 month with average losses of 1.2% and 0.7% respectively. June is #8 for NASDAQ and Russell 2000.