The US Stock Market: Sell In May And Go Away?
In our previous April 2nd update, we pointed out that the S&P 500 (SPX) was moving above important overhead resistance at 2800 to 2817 and said this cleared the way for a retest of the broad market index’s September 2018 all-time high of 2941. SPX has since risen by an additional 51 points or 1.8%, as expected, and is now positioned just below these all-time highs — setting up another near term decision point for the market, and the likely springboard for its next significant directional move.
Does the 2019 uptrend continue from here, or does the well-known “sell in May and go away” seasonal decline begin?
We are currently watching a short list of particularly relevant and important indexes and metrics to make this determination — and as soon as possible. One of these is the NASDAQ 100 Index (NDX), which represents market-leading technology stocks. The chart below plots NDX daily since mid August with its 200-day moving average, a widely-watched major trend proxy. Not shown is that NDX has been outperforming SPX since late November 2018, leading the US broad market higher.
The red highlights show that this index has spent the past two days (April 17th and 18th) bumping up against its 7701 October 2018 all-time highs, which is major resistance. Considering Technology’s propensity to lead the US broad market both higher and lower, and NDX’s nearly lockstep positive correlation to SPX over the past 30 years, how NDX resolves this test of major resistance is likely to be a coincident — if not leading — indication of whether the 2019 US broad market advance continues its torrid pace into the summer or begins an overdue corrective decline.
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