For the last two weeks, we have talked extensively about seasonality in the market. It is of utmost importance for a trader to understand that April historically was the best performing month on the S&P 500 while May is one of the worst.
Below is a chart of the aggregated performance of the S&P 500 during our current bull trend (2009-2016). While the current May performance in 2017 is slightly above the aggregate, the pattern looks surprisingly similar.
If we continue to model the chart above, seasonally speaking we have a few bearish weeks ahead of us. While it would be foolish to trade exclusively off from a seasonal perspective, this does add a little context for the technical analysis we are about to review.
To be clear as we move forward…
A SEASONAL CHANGE IN MOMENTUM SHOULD NOT BE MISUNDERSTOOD TO BE A CHANGE IN THE PRIMARY TREND.
Trading a seasonally bear market during a well-defined bullish trend is tricky. It requires a little extra vigilance in our analysis and risk management. For now, let’s complete our analysis and then we will discuss strategy.
From the most simplistic perspective, the S&P 500 is clearly at a pivot point. Resistance, to be specific. While in an uptrend, this should never become a primary reason for adopting a bearish outlook. However, it might also give some context to the potential for some upcoming bearish weeks. [Access Your Complete Market Briefing Now]
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