Market at a Glance

Market at a Glance - 5/31/2018

By: Christopher Mistal

May 31, 2018

Psychological: Resolute. Market volatility this year has reminded everyone that the market does not always go straight up in a nice predictable path. This has not deterred many from remaining bullish. According to Investor’s Intelligence Advisors Sentiment survey bulls are at 50.0%. Correction advisors are down to 30.8% and Bearish advisors are just 19.2%. The recent increase in bullish sentiment has coincided with broad market strength and will likely fade just as quickly should the market falter for more than just a few days.

Fundamental: Firm. Most incoming data suggests the economy is on firm ground. The labor market appears tight with unemployment at 3.9%, but labor force participation is still well below its all-time high. Growth forecasts for the current quarter remain strong with Atlanta Fed GDPNow model forecasting 4.7%. Corporate profits are firm as well. Risks include protectionist policy (new tariffs), renewed European Union concerns (Italy) and midterm elections. It is always a good idea to be aware of what could happen, just don’t lose sight of what is happening.

Technical: Range bound. Until DJIA, S&P 500, NASDAQ and Russell 2000 all make higher highs or lower lows this best describes their recent trading. Recent NASDAQ and Russell 2000 strength is encouraging, but these two alone cannot pull the broader market higher. Mid-May’s breakout above April’s high by DJIA and S&P 500 is increasingly looking like a fake out. Key support remains right around each index’s 200-day moving average.

Monetary: 1.50-1.75%. May’s Fed meeting came and went with little drama. Interest rates were left unchanged, inflation was seen running near target and labor market conditions remain firm. Currently, there is an 83.8% chance of a rate hike at the June meeting based upon the CME Group’s FedWatch Tool. Rates are still quite accommodative to continued growth within historical context.

Seasonal: Bearish. 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 midterm years, June really struggles. June is #12 DJIA, S&P 500 and Russell 1000 month with average ranging from 1.4% to 1.9%. June is #10 for NASDAQ and #9 for Russell 2000.