April Outlook: Rally Respite After Big Best Six Months Gains
By: Jeffrey A. Hirsch & Christopher Mistal
March 28, 2024
Monday is the beginning of the last month of the “Best Six Months (BSM)” (November-April) for the Dow and S&P 500 – and what a banner one it’s been so far. From our Seasonal MACD Buy Signal on October 9, 2023, through yesterday’s close (March 27, 2024), DJIA is up 18.32% and S&P 500 is up 21.05% – more than double the historical average BSM gains. Our Best Six Months Seasonal MACD Sell Signal can trigger anytime on or after the first trading day of April, which is Monday April 1st this year. NASDAQ’s Best 8 Months end in June, which is up 21.62% since our buy signal, not quite double the average but give it time.
We are not issuing the signal at this time. We are only preparing you for when it does arrive
When both the DJIA and S&P 500 MACD Sell indicators trigger a new sell signal on or after April 1, we will send an Almanac Investor email. We will either outright sell specific existing positions or implement tight trailing stop losses. We will also consider establishing new positions in traditionally defensive areas of the market which may include bond ETFs, gold and gold stocks, outright bearish (short) positions and other sector ETFs with a demonstrated track record during the “Worst Six Months.” All stock and ETF holdings will be evaluated at that time. ETFs providing exposure to sector seasonalities ending in April and May along with underperforming stocks in the Almanac Investor Stock Portfolio may be sold at that time as well.
As you can see here in the chart below of the S&P 500 both the 12-26-9 sell side MACD and the 8-17-9 buy side MACD have been flatlining, oscillating between a positive and negative histogram (pink highlight), for months indicating waning momentum as the rally has marched higher. This is the beginning of our shift to a more cautious “Worst Months” stance. We remain bullish for 2024, but we suspect the bulk of the next leg up will transpire in the latter part of the year after some consolidation and/or weakness during Q2-Q3. 
[S&P MACD Chart]
Great Starts
Let’s first address the stellar start to the year and what that indicates for the rest of the year. With the S&P 500 up just over 10% for Q1 2024 that is the best start to a year since 2019. In the table below we have listed the eleven other years since 1950 that have gained 10% or more in the first quarter of the year. Overall, the remainder of these years is solid. The 1987 Crash stands out as the big blemish. Following the rally off the 1974 low 1975 suffered a 14.1% summer correction from the mid-July peak to the mid-September low but finished the year with the 5th best gain since 1950. In general, the market took some sort of breather during the last three quarters of these years, but except for 1987 all finished strong.
[Great Starts]
Great Election Year Starts
But this is a great start to an election year, the third best election Q1 since 1950, and that is significant to us. In the following table we have separated the previous 18 election years by Q1 performance. The top seven are above average Q1 gains (see Fourth Quarter Market Magic, 2024 Almanac, page 82). The middle four are positive “average” gains. The bottom seven are Q1 losses. With election year 2024 closing out Q1 today with a gain of 10.2% let’s focus on the top section that this year’s market falls into.
The top three years, where 2024’s performance lies, show clear weakness in April and May with some additional weakness in Q3 or Q4. Additional gains over the Last 9 Months of the year were limited in these top three years. In 1956 the market was impacted by turmoil surrounding disputes regarding the Suez Canal and Hungarian Revolution. In the other years the market suffered a soft patch or more at some point over the Last 9 Months of these years. All but 1956 finished the year higher than the close of Q1.
[Great Election Year Starts]
For even greater perspective we have added the line of these seven Top Q1 Election Years to our S&P 500 Election Year Seasonal Pattern chart in red. Note the dip in April and May, the chop in July and August and how these years have marked time until the election in November, gaining about 2.5% on average over the seven months from April to October. 
[Election Year Seasonal Chart with Top Q1]
The market has been on a tear since late October, up five months in a row and up solidly in each. We have logged one of the best first quarters in history and that bodes well for the year as a whole and is in line with our continuing bullish forecast for 2024. The 4-Year Cycle and seasonality continue to fire on all pistons. The market will not track these cycles and patterns this closely all the time, but while they are it is prudent to heed them. And what they are telling us now is that while we see no sign of impending doom or a major sell off, the bull market rally is ready for a bit of a respite. 
The big rewards we have reaped this Best Six Months and year-to-date so far have not left much on the table until later this year. Risks are more elevated now. Sentiment continues to run high. Valuations are extended. Geopolitical tensions have not eased. And persistent inflation pressures have the Fed in no rush to cut rates. As the election campaign rhetoric heats up and the Best Six Months comes to a close be prepared to shift to a more cautious stance when we issue our Best Six Months Seasonal MACD Sell Signal. We do not expect a bear market or major correction. We do not Sell in May and go away. We sell some things, tighten stops and consider defensive positions if warranted. So, keep an eye on your inbox for our Best Six Months Seasonal MACD Sell Signal.
Pulse of the Market
DJIA continued higher throughout March finishing the month with a 2.1% gain and Q1 with a 5.6% advance. DJIA’s performance in March is well above its historical election year average March gain of 0.2%. Q1 performance is solid, but only good for 24th best Q1 by percentage since 1950. As unusual or extraordinary as it may feel, DJIA’s performance so far this year is still not an unprecedented record. Aside from a few new all-time highs (1) in March, DJIA will have to continue its quest for 40,000 in April.
DJIA’s pace of gains has slowed with the 50-day moving average (black line) moving closer to its daily closing prices. This waning momentum is being confirmed by both the faster and slower moving MACD indicators that peaked late last year and have been slowly trending back toward the zero line. As of today’s close, March 28, DJIA’s slower moving MACD sell indicator is positive (2). Additional modest upside is possible in April, DJIA’s historically best month of the year, but the majority of seasonal gains have most likely already been delivered.
[Dow Jones Industrials & MACD Chart]
After advancing in 15 of 17 weeks from late November through the week ending February 23, DJIA (3) has declined in three of the last four, while S&P 500 (4) and NASDAQ (5) declined twice in the same period. DJIA and S&P 500 advanced this week, NASDAQ did suffer another mild decline. Market dips continue to be shallow and brief, but the pace of gains has also slowed.
Market breadth over the last four weeks has been generally fair. NYSE Weekly Advancers (6) have outnumbered Weekly Decliners in three of the last four weeks. Last week had the biggest weekly gains and the greatest number of Weekly Advancers. Last month we were looking for a broadening of the rally with an expanding number of Weekly Advancers. Aside from last week’s mild improvement, it still appears participation is sporadic.  
Bullishly, there was an improvement in the number of New Highs (7) as they reached 590 during two separate weeks in March. This is the highest level of New Highs since June 2021 when they hit 781. The actual peak in New Highs in 2021 occurred during the week ending March 12 at 951. Even if New Highs have peaked, the rally could continue. The pace and frequency of gains will likely continue to slow though. Ideally, more Weekly Highs would likely mean a stronger rally.
Recent inflation data has been a bit warmer than expected and as a result the 30-year Treasury bond yield has resumed its climb modestly higher (8). Market weakness ahead of mid-March did cause the 30-year bond yield to dip but its yield rebounded to the highs of the year last week. Whether the 30-year yield goes higher or not is going to largely depend on upcoming inflation data.
[Pulse of the Market Table]