NASDAQ Seasonality has changed to a more negative stance after today’s negative performance. Caution is warranted in tech stocks. Bonds can be added as summer months can provide weakness to stocks.
So far, April has regained some of this years losses – in fact the NASDAQ is again positive for 2020.
What should investors do now that markets are entering the weakest period of the year? How bad could this year be, actually?
Usually at this time of the year, early-April, stock markets would have had a nice seasonal rally. Well, there is nothing usual about the market or the economy this time.
As of today, the new bear market closing lows were on March 23. From their highs DJIA was down 37.1% and S&P 500 was down 33.9%.
Since then the market has rebounded to trim those losses.
Now we look to position for the worst months of the year ahead.
Unlike weather and the biblical tales, stock markets in March usually start with stability and turn wild with volatility towards the end.
January is typically a good month for US stocks. However, during election years that is not always the case. Nasdaq stocks usually perform the best in January.
Political stability creates a solid back drop for a decent 2020. The US Fed is accomodative while weak earnings and high valuations remain.
There are several market tendencies or historical biases that we highlight throughout the year. One historical tendency worth noting at this time of year is the “January Effect.” The “January Effect” refers to the tendency of small cap stocks (as a group) to outperform their large cap counterparts early in the calendar year.
Markets are up strongly since we turned bullish. We expect that momentum to continue after a mild pullback. Overbought signals are here.
November is generally a very good month for US stocks. However, in years preceeding US Presidential elections, November has not always shown a strong performance. This year, options expiration week comes early. Our calendar shows the dates investors need to watch.
Oil prices usually enter a weak period starting in September. Is it playable? Seasonality holds true this year so far. Trades in defensive sectors doing well so far.