The stock market is gearing up for a summertime rally.
That comment might seem strange coming from me – since I’ve been talking about a stock market crash happening later this year. But, before we get to that crash… the market has one last hoorah.
Let me explain…
The S&P 500 rallied over 11% during the first quarter of 2019. That’s a monster move.
And, if history is any sort of a guide, similar monster moves have led to gains in the second quarter as well.
If we take 2019 out of the equation and look at the top 10 first quarters of the past 70 years, the stock market was also higher in the second quarter eight times. The two losing years, 1991 and 1967, saw losses of just 0.2% and 0.9%, respectively, during the second quarter. The gains during the second quarter of the other eight years averaged 3.7%.
In other words, the average gain of the eight winning years was more than four times the largest loss of the two losing years.
For the second quarter of 2019 so far, the S&P 500 is down about 4%.
It would be unusual for the market to be down for the second quarter this year. And, it would be highly unusual for it to be down this much.
Of course, that doesn’t mean it can’t happen. But, based on history, the odds favor a rally in June.
The technical conditions are also pointing to a rally.
For example, bullish sentiment among investors (a contrary indicator) is now down to where it was just before the stock market bottomed last Christmas Eve. The CBOE Put/Call ratio – also a contrary indicator – recently closed above 1.40. That’s an extremely high reading that often leads to at least a short-term rally in the stock market. In fact, the put/call ratio is now at the highest level since the market bottomed on Christmas Eve.
The McClellan Oscillator for the Nasdaq (NAMO) is also approaching extremely oversold territory. It’s now at a level that often signals we’re near the end of a correction phase for the market.
Take a look…
There have only been three other times over the past year when the McClellan Oscillators for the Nasdaq dipped into extremely oversold territory. This didn’t always mark the exact bottom of the decline. Sometimes the market fell a bit further over the next few days. But, in every case, the S&P 500 was higher one month later by an average of about 5%.
So, like I said… despite my bearishness for the market going out to later this year, it looks to me like we’re set up for a fairly decent rally in June.
Best regards and good trading,
In today’s mailbag, subscribers share some of their successful trades…
Thank you, you Jeff. On a recent trade, I got in at $0.47 sold at $0.95 for a 100% profit. Looking forward to more picks.
I joined your service less than a week ago and have just sold half of my first trade: Bought at $0.60 and sold at $1.48. I believe that would add up to around 235%. Not bad for a first trade. Thank you and please keep them coming.
I am very impressed with my start to your Delta Report. Looking forward to getting good results. Thanks.
And another subscriber talks about their defensive strategy…
By year end, companies will be down at the least 25-30%. As such, I am getting defensive now… I’m also building cash to about 20%. Those positions will also go down but not as much as their more aggressive growth-oriented companies. I’m also purchasing bitcoin to level out the volatility as bitcoin is non-correlated with the stock market.
Thanks for your guidance and I intend to make money with your options trades as the market plummets by year end. Have a great day.
Do you think we’re due for a summertime rally? Or do you see the market crashing sooner than that?
Let us know, along with any other trading questions, suggestions, or stories at [email protected].