Market at a Glance - 5/25/2023
By: Christopher Mistal
May 25, 2023
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Please join us for an Almanac Investor Member’s Only discussion of recent market action and an update on NASDAQ's Seasonal MACD Sell (not triggered) with time for Q & A at the end. Jeff and Chris will cover their outlook for June, review the Tactical Seasonal Switching Strategy ETF, Sector Rotation ETF, and Stock Portfolio holdings and trades. We will also share our assessments of the Fed, inflation, recession prospects, debt ceiling as well as relevant updates to seasonals now in play.
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Market at a Glance
5/25/2023: Dow 32764.65 | S&P 4151.28 | NASDAQ 12698.09 | Russell 2K 1754.60 | NYSE 14975.97 | Value Line Arith 8679.52
Seasonal: Neutral. June is the last month of NASDAQ’s Best Eight Months. Historical performance has been tepid for DJIA and S&P 500 while NASDAQ averages 0.8% in June since 1971. In pre-election years, June has been stronger, gains range from 1.1% for DJIA to 2.4% for NASDAQ. NASDAQ has advanced in 8 of the last 13 pre-election year Junes. NASDAQ’s Seasonal MACD Sell Signal can trigger as soon as June 1.
Fundamental: Anemic. Inflation continues to show signs of moderating with year-over-year changes in headline CPI and PPI trending lower. U.S. GDP for Q1 was revised higher to an annual rate of 1.3%. Employment metrics remain firm, but more tech-sector layoffs could pressure broad measures. Corporate earnings were less bad than initially estimated, yet still down from year-ago levels. The Federal debt ceiling is still unresolved with just one week until a potential default.
Technical: Divergent. DJIA and Russell 2000 continue to struggle and are essentially unchanged year-to-date. NASDAQ has charged higher led by a handful of mega-cap stocks. S&P 500 and its heavy exposure to tech has enjoyed modest gains with waning participation. NASDAQ is attempting to break out above its highs from last August, but DJIA, S&P 500 and Russell 2000 are lagging to varying degrees. Absent broader participation, NASDAQ’s breakout is likely to run out of momentum.
Monetary: 5.00 – 5.25%. The Fed did exactly what was widely anticipated it would do at its May meeting, it raised Fed funds by 0.25%. Recent comments by Fed officials appear to indicate another hike could be on its way when it next meets in June. But, according to CME Group’s FedWatch Tool, there is just a 53.9% chance of a 0.25% rate hike in June as of today, May 25. Based upon historical inflation data, the Fed’s 2% target does not seem that realistic. A sounder target may be around 3%, near the long-term average of CPI.
Sentiment: Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 46.5%. Correction advisors are at 29.6% while Bearish advisors numbered 23.9% as of their May 24 release. Compared to prior weeks, the most recent reading has a modest increase in bulls and a corresponding small retreat in bears and correction advisors. The overall improvement in sentiment is consistent with the market’s recent modest gains during the survey period. Sentiment is neither frothy nor outright fearful, which seems to suggest the market is going to remain rangebound for the time being.