NASDAQ Seasonal MACD Update: It’s a Bear Market

By: Jeffrey A. Hirsch & Christopher Mistal

June 13, 2022

As of today’s close, the slower moving MACD “Sell” indicator applied to NASDAQ is negative. NASDAQ’s “Best Eight Months” has come to an end. At this time we are issuing our official MACD Seasonal Sell signal for NASDAQ.

Sell Invesco QQQ (QQQ).

Sell iShares Russell 2000 (IWM).

For tracking purposes, these positions will be closed out of the Tactical Switching Strategy ETF Portfolio using their respective average prices tomorrow, June 14.

NASDAQ declined 25.9% during its historically bullish period. This down “Best Eight Months” with MACD timing period is the first loss for the strategy since the early days of the financial crisis in 2008-2009. It is NASDAQ’s second worst loss ever during its “Best Months.” Its worst loss was 32.2% during the beginning of the Dot-com bubble burst in 2000.

In addition to today’s NASDAQ Seasonal Sell, the DJIA is officially in a bear market as of today’s close. For years we have relied upon the Ned Davis Research definition of bear and bull markets. An official bear market requires a 30% drop in the Dow Jones Industrial Average after 50 calendar days or a 13% decline after 145 calendar days. Reversals of 30% in the Value Line Geometric Index also qualify. The drop is measured from peak to trough and both price and time criteria must be met. At today’s close it has been 160 calendar days since DJIA’s peak on January 4, DJIA is down 17.1% and at a new closing low which meets the parameters.

Inflation is stubbornly remaining at multi-decade highs, the Fed is tightening, sentiment is bearish, support levels are not holding, supply chain disruptions persist, there is conflict in Europe and energy prices are at record highs for consumers. Continue to be patient as the Weak Spot of the four-year-cycle will eventually give way to the Sweet Spot, likely sometime later in Q3 or in early Q4. Even with inflation at multi-decade highs, cash is likely the least risky place to wait.