June Outlook: Tactical Shift, Bullish 2026 Forecast Remains on Track By: Jeffrey A. Hirsch & Christopher Mistal | May 21, 2026 | Email | Print

We are pleased to inform you that proofs of the 2027 Stock Trader's Almanac — our 60th Anniversary Edition — are in final review. Six decades of cataloguing how habitual human and institutional calendar behavior drive markets. Please remember the new edition will be out early again this year in September just after Labor Day. More on the anniversary edition as we move toward release. Now as we head into Memorial Day Weekend let’s examine the current market environment, what’s changed, what remains the same and how we expect the market action to pan out over the remainder of the year.

 

Our Best Six Months Seasonal MACD Sell Signal triggered Monday, May 18 on DJIA and S&P 500. SPY, DIA and IYT (Dow Transports) were closed out of the ETF portfolios at May 19 average prices. QQQ and IWM remain on Hold. NASDAQ’s “Best Eight Months” doesn’t end until June and the earliest the NASDAQ MACD Sell can trigger is June 1. SHV and SGOV were added as our preferred low-risk/low-reward vehicles for the “Worst Months” cash position. 

 

The Sell Signal puts DJIA and S&P 500 officially into the Worst Six Months (May–October) and marks the start of tactical adjustments, not a wholesale exit. NASDAQ is set to enter its Worst Four (July–October) once the Best Eight MACD Sell triggers. The calendar gets worse from here before it gets better. Between now and when NASDAQ’s Seasonal MACD Sell triggers, we gradually shift toward a more neutral stance.

 

Our bullish 2026 forecast has not changed. Base case remains 8-12% full-year gains. We don’t expect any major selloff. However, with the war in Iran dragging on, energy prices look likely to remain stubbornly high, which is translating into higher inflation and higher Treasury yields. So, we wouldn’t be surprised to see more volatility through the summer months – potentially with S&P 500 retreating to fill the April ceasefire gap in the 6600-6700 zone.

 

 

June ranks no better than eleventh in midterm years since 1950. It is the worst June for DJIA, S&P 500, NASDAQ, and Russell 1000 in midterm years, with average losses ranging from 1.8% on Russell 1000 to 2.1% on S&P 500 and Russell 2000. All five indexes have declined more times than they have risen in midterm year Junes. Combined with the 4-Year Cycle Weak Spot in midterm Q2–Q3, the seasonal backdrop is the most consistently negative window of the four-year cycle.

 

Memorial Day is the unofficial kick off to summer. Folks tend to begin gravitating away from the markets with kids home from college, graduations, and early vacations. This generates the propensity for choppy mixed trading in the week before and after Memorial Day. It is also worth noting that the World Cup occurs in June and July and is being hosted here in the US this time. This is a sizable global distraction during an already weak seasonal stretch.

 

Midterm politicking is ramping right on cue as several hotly contested primaries for House seats in battleground districts have been in the headlines. President Trump has already been engaging in these races. As a student of history, he is well-aware how the president’s party usually loses seats in the midterms – with the razor thin margins Republicans currently hold in Congress, this midterm election is especially important. This is what creates the 4-Year Cycle Weak Spot during Q2-Q3 of the midterm year. 

 

Glancing at the updated chart of the S&P 500 Midterm Election Year Seasonal Patterns it is not hard to envision this near vertical market rally off the March low suffering from a little mean reversion and marking time, bouncing around from correction to rally and gaining little ground from now through Q3 or early Q4. Lest we forget October’s notorious penchant for trouble and midterm bottoms – AKA Octoberphobia.

 

 

 

In addition to our MACD Best Six Months Seasonal Sell Signal, market breadth has begun to weaken even as DJIA finally logged its first new all-time high today since February. While the major averages have all logged new highs in May now – and it’s been an impressive run since late March – the rally appears to be stalling. The tape has begun to lose momentum as internals deteriorate. 

 

The unfilled April ceasefire gap for S&P 500 that sits in the 6,600–6,700 zone is about a 10-12% retracement from the May 14 high at 7501.24. In a perfect world, the S&P fills that gap sometime in August or September. That kind of move would not be inconsistent with the broader trend, would not invalidate our bullish base case thesis for 2026, and would set up a textbook launching pad for the sweet spot of the 4-year cycle and a prototypical pre-election year bull run in 2027.

 

 

The shift in the interest rate picture is a concern. The 10-year is back above 4.5% and has floated near the May 2025 and January 2025 highs around 4.7%. The 30-year touched 5.2% Tuesday, a 19-year high, while oil prices hover around $100 and inflation, currently above 3.5%, trends higher. The CME FedWatch tool has now flipped its bias: December 2026 carries roughly 60% probability of a rate hike; while there is essentially zero probability of a cut anywhere in the tool presently. This is a meaningful shift from where the curve sat just weeks ago.

 

The 5% level on the 10-year would be a concern. If the 10-year takes out the January 2025 highs and grinds toward 5%, mortgage rates could rise back up toward 8%. If the housing market is already complaining at 6%, what happens at 8%? 

 

Last time rates hit these levels was October 2023. Stocks had already taken a 10-12% correction from July to October. Rates backed off, the market rallied — only interrupted by the April 2025 tariff tumble and the March 2026 Iran War correction. The market has absorbed higher yields for much of the advance. We’re watching if it can continue to absorb them if rates stay this elevated or move higher.

 

 

 

The ETF portfolios have shifted. DIA, SPY and IYT were sold on the MACD Seasonal Sell Signal May 18. XLP, XLV, IYW, IBB, XBI, and XLU are the Worst Months defensive positions, based on those sectors’ historical tendency to outperform the S&P 500 from May through October. IYW, QQQ and IWM are likely to track NASDAQ and its Best Eight Months that run through June — hold the tech and small cap exposure. XLP, XLU and XLV are the lower-volatility defensive choices. 

 

While the seasonal sell has triggered our repositioning to a more neutral posture, we are still holding the tech, small-cap and defensive worst six months positions. We don't think the market is due for a big hit — but stubborn energy, stickier inflation, a Fed Watch tool now pricing in hikes, and the worst June of the four-year cycle argue for more volatility through the summer. Chop through the Worst Six and Worst Four, gap fill in late summer in the 6,600–6,700 zone, then set up for the Q4 sweet spot and 2027. Base case 8–12% full-year gains remain on track. And DJIA at new highs provides plenty of room to reposition for the usual seasonal summer weakness.

 

(Disclosure note: Officers of Hirsch Holdings Inc hold positions in DBA, EFAV, EFV, IBB, IDV, IWM, QQQ, UNG, XBI, XLE, XLP and XLU in personal accounts.)

 

 

DJIA’s strong positive momentum from its late-March low has faded (1) with the arrival of historically tepid midterm-year May. As of DJIA’s close today, it has gained 11.3% from its March 27 closing low but is only up 1.28% this May with about half of that gain being generated today. DJIA has remained firmly above its 50- and 200-day moving averages since mid-April and the 50-day moving average is now rising.

 

Fading DJIA momentum has been confirmed by both the faster and slower moving MACD indicators (2) turning negative. DJIA’s MACD Sell 12-26-9 indicator first briefly turned negative on May 5 and has remained negative since May 8. The same MACD Sell 12-26-9 indicator applied to S&P 500 turned negative earlier this week on May 18. As a result, the criteria to issue our Seasonal MACD Sell for DJIA and S&P 500 were satisfied and action has been taken in the Tactical Seasonal Switching Strategy ETF Portfolio.

 

 

As DJIA’s rise began to cool, it issued back-to-back Down Friday/Down Monday (DF/DM) warnings (3) (page 78 STA 2026). Historically, DF/DM occurrences have frequently been important market inflection points. Thus far, DJIA has largely shrugged off these two DF/DMs by quickly recovering its losses and breaking out to a new all-time closing high. The concern is, S&P 500 and NASDAQ are not at all-time closing highs, and this divergence could also be an early warning sign.

 

Since the beginning of April, S&P 500 (4) and NASDAQ (5) have enjoyed lengthy, weekly winning streaks. NASDAQ’s streak ended at six after a fractional –0.1% weekly decline last week. S&P 500’s weekly winning streak is at seven and on its way to an eighth straight as its approaches the last day trading day of the week with a gain. The last time S&P 500 was up eight or more weeks in a row was in November and December of 2023 when it ran nine straight weeks.

 

The cooling of market gains has been accompanied by a corresponding deterioration in weekly market breadth data. Last week (ending May 15, 2026) NYSE Weekly Decliners (6) reached the highest level since March when the Iran War was not in a ceasefire. Weekly New Highs dropped to similarly low levels. Until breadth data favors weekly advancers, the market is not likely to make any meaningful move higher.

 

There has also been a notable pickup in the number of New 52-week Lows over the past few weeks (7). After hitting a low of 56 in April, New 52-week Lows have ballooned to 214. New 52-week Highs have also retreated. When combined with anemic weekly breadth data, the market’s rally does appear to have run out of gas, at least here in the near-term. For the major indices to return to all-time highs, additional New 52-week Highs are likely needed.

 

With crude oil prices hovering around $100 per barrel, inflation expectations have continued to rise, pushing long-dated Treasury bond yields higher. The 30-year Treasury bond yield (8) exceeded 5% last week and is at its highest level since July 2007. Thus far, the market’s response to higher interest rates has been subdued. However, if the trend in rates persists, there is likely a level that could inflict more meaningful harm on the market. Although not included in the table, the 10-year Treasury bond yield reaching and/or exceeding 5% would likely draw the market’s attention.