July Almanac & Vital Stats: Best S&P 500 And NASDAQ Month By: Jeffrey A. Hirsch & Christopher Mistal | June 20, 2024 | Email | Print

 

NASDAQ’s June surge ran into a bump today, falling 0.79%, but NASDAQ’s Seasonal MACD indicator remains positive. Continue to hold associated positions in QQQ and IWM. It would take a single day decline exceeding 499.75 NASDAQ points (–2.82%) to turn NASDAQ’s MACD negative.

 

 

When NASDAQ’s Seasonal MACD turns negative we will send an email to all active members. At that time, we will finish repositioning our Portfolios for the “Worst Months.” We do anticipate adding to existing bond ETF and cash holdings in the Tactical Seasonal Switching Strategy portfolio.

 

 

July historically is the best performing month of the third quarter, however the mostly negative results in August and September tend to make the comparison easy. “Hot” Julys in 2009 and 2010 where DJIA and S&P 500 both gained greater than 6% combined with strong performances in 2013, 2018, and 2022 have boosted July’s average gains since 1950 to 1.4% and 1.3% respectively. DJIA, S&P 500, NASDAQ and Russell 1000 have been up nine straight Julys (2015-2023). Russell 2000 has been up seven times in the same period (down in 2015 and 2021). Such strength inevitability stirs talk of a “summer rally”, but beware the hype, as it has historically been the weakest rally of all seasons (page 74, Stock Trader’s Almanac 2024).

 

July begins NASDAQ’s worst four months but is also the sixth best performing NASDAQ month since 1971, posting a 0.9% average gain. Dynamic trading often accompanies the first full month of summer as the beginning of the second half of the year brings an inflow of new capital. This creates a bullish beginning, middle, and a mixed second half. On average, over the last 21 years, nearly all of July’s gains have occurred in the first 13 trading days. Once a bullish day, the last trading day of July has had a bearish bias over the last 21 years. In election years since 1950, July has tended to be a dull month filled with choppy trading.

 

 

July’s first trading day is the third best performing first trading day of all twelve months with DJIA gaining a cumulative 1679.02 points since 1998. Over the past 21 years, DJIA’s first trading day of July has produced gains 81.0% of the time with an average advance of 0.38%. S&P 500 has advanced 90.5% of the time (average gain 0.46%). NASDAQ has been similarly bullish advancing 85.7% of the time (0.51% average gain). No other day of the year exhibits this amount of across-the-board strength, which supports the case for declaring the first trading day of July the most consistently bullish day of the year over the past 21 years. Although, the third from last day of August is rising to challenge for this title.

 

Trading on the day before and after the Independence Day holiday is often lackluster. Volume tends to decline on either side of the holiday as vacations begin early and/or finish late. Since 1980, DJIA, S&P 500, NASDAQ and Russell 2000 have recorded net losses on the day after.

 

 

Election-year July rankings are something of a mixed bag, ranking #6 for DJIA and S&P 500, averaging gains of 0.6% and 0.7% respectively (since 1950). For NASDAQ (since 1971) election-year Julys rank #9 with an average loss of 0.1%. Despite a modest average gain, election-year Julys rank #10 for Russell 2000 with six losses in eleven election years since 1979.

 

 

 

In the mid-1980s tech’s influence in the market began to grow and the market’s focus in early summer shifted to the outlook for second quarter earnings of technology companies. In anticipation of positive results, over the last three trading days of June and the first nine trading days in July, NASDAQ typically enjoys a rally. This 12-day run has been up 30 of the past 39 years with an average historical gain of 2.5%. Look for this rally to begin around June 26 and run until about July 12.

 

After the bursting of the tech bubble in 2000, NASDAQ’s mid-year rally had a spotty track record from 2002 until 2009 with three appearances and five no-shows in those years. However, it has been quite solid over the last fourteen years, up twelve times with two losses. After struggling in the bear market of 2022, NASDAQ resoundingly rebounded last year to gain 4.1% compared to a total July gain of 4.0%.

 

 

Our NASDAQ Seasonal MACD Signal remains positive keeping the portfolios positioned to benefit from the Midyear Rally. The best scenario would be for NASDAQ to quickly shake off today’s weakness and resume its June surge higher.