Market at a Glance

Dow 50285.66 | S&P 7445.72 | NASDAQ 26293.10 | Russell 2K 2843.45 | NYSE 23127.69 | Value Line Arith 13187.33

Seasonal: Bearish. Although June is the final month of NASDAQ’s “Best Eight Months,” it is the worst month in midterm election years for DJIA, S&P 500, and NASDAQ. Average midterm June losses range from –1.9% from DJIA and NASDAQ to –2.1% by S&P 500. End of quarter portfolio restructuring can weigh on June’s performance, but any late-month weakness also tends to set up NASDAQ’s Midyear Rally. This 12-trading-day run has been up 32 of the past 41 years with an average historical gain of 2.5%.

Fundamental: Murky. According to the Atlanta Fed’s GDPNow model, Q2 GDP estimates are on the rise and stand at 4.3% as of its update today. Corporate earnings and estimates have been broadly positive and bullish. Unemployment remains low and weekly initial jobless claims are still subdued. But the Iran War is still unresolved, crude oil is still around $100 per barrel, inflation is accelerating, tech sector layoffs appear to be picking up and the 10- and 30-year Treasury bond yields are rising.

Technical: Consolidating. After numerous new all-time highs, S&P 500 and NASDAQ have taken a breather. DJIA did close at a new all-time high today, but it is just its first since February 10. Absent across-the-board new highs, consolidation is likely as long as headlines allow. Some key support levels to watch during this pause are DJIA around 48,750, S&P 500 around 7,150 and NASDAQ just under 25,000. Those are near their respective late-April pauses. A meaningful break below could reopen an eventual path back down toward the early-April gap. 

Monetary: 3.50 – 3.75%. New Fed chairman Kevin Warsh will have been on the job for a month when the Fed next meets on June 16 & 17. With inflation accelerating and the CME Group’s FedWatch Tool now pricing in interest rate hikes, Mr Warsh will likely be hard pressed to maintain a neutral or easing monetary policy outlook. Despite concerns that “the market always tests new Fed chairs,” our research found new Fed chairs were not so bearish after all.

Sentiment: Neutral. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 48.1%. Correction advisors are at 30.8% and Bearish advisors were 21.1% as of their May 20 release. These are the exact same levels as their April 22 release. Bullish sentiment did pick up as the indexes were hitting new highs but quickly cooled when they paused. Overall sentiment levels suggest the market could continue climbing but the pace is likely to be much slower as traders and investors adjust their expectations following the brisk rally from the March lows.