Folks have been questioning recently the validity and efficacy of seasonal market patterns as the equity markets have shown resiliency over the worst six months and the major indices log new highs, except for the Russell 2000(NYSEARCA:IWM).
I have been hearing a good bit of frustration with our worst six months seasonality and out rather cautious stance. But it is at times like this when traders and investors throw in the towel on these evidence-based patterns that they often come home to roost.
We have cited recently many of the fundamental, technical, psychological and geopolitical risks and reasons the market is ripe for a correction in addition to the seasonals. Our Best Six and Eight Month Switching Strategies have served us and our clients and subscribers well over the long and short terms.
So while the market has held up pretty well since “Sell in May” it has not done much since our June 9 NASDAQ MACD Sell Signal when we went more fully risk off. At that time we held our big winners, sold underperformers, tightened up stops, limited new longs and implemented some defensive positions. After logging double-digit gains from our October 24 MACD Buy Signal, since June 9 DJIA(NYSEARCA:DIA) is up 4.0%, S&P 500 2.7%, NASDAQ (NYSEARCA:QQQ) 4.0% and the Russell 2000 0.1%.
In addition, September may look extremely robust on first blush, but look at the update chart below of a typical September with 2017 so far overlaid. It still looks like we are on track for a late month selloff, or at least set up for some month-end softness.