“Sell in May” failed miserably, again. This shouldn’t be a surprise, since every May since 2013, stocks have risen.
June doesn’t have a catchy moniker like May, but, as every month, it has a seasonal track record.
Since the beginning of this bull market in 2009, the S&P 500 Index SPX, -0.01% recorded a June gain five times, and a loss four times. On average, the S&P 500 has fallen 0.55% in June.
Read: Why indexing will fail investors in the coming dismal decade for stocks
How are things looking for June 2018?
The facts (refer to chart, below):
1. On May 30, 81% of stocks traded on the NYSE advanced, the best upside thrust since Feb. 23.
2. On May 10, the S&P 500 broke above trend line resistance (ascending green line), and retested the same line on May 29 (green dots). This line is now support.
3. The S&P 500 broke above its 2,710-2,742 trading range. This range is now support.
4. The CBOE equity put/call ratio is at the lowest level since Jan. 2.
5. The yellow insert shows seasonality (based on S&P 500 data since 1950) for June.
Interpretation of the facts:
Items one through three are bullish, and suggest higher prices (especially when viewed in context of the bigger picture outlook; see bottom of article).
The low CBOE equity put/call ratio generally suggests some kind of pullback. Based on the structure of the advance, the upcoming pullback could be quite shallow (watch support at 2,742-2,710).
Conclusion: The indicators suggest limited upside and limited downside for June, neither boom nor bust. Trade should stay within resistance (2,800-2,830) and support (2,700-plus).
More importantly, June could be a “foundation-building month” for what’s next. The bigger-picture outlook of what’s next is discussed here: S&P 500 outlook.
Simon Maierhofer is the founder of iSPYETF and publisher of the Profit Radar Report. He has appeared on CNBC and FOX News, and has been published in the Wall Street Journal, Barron’s, Forbes, Investors Business Daily and USA Today.