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S&P 500 Kicks off Late-April Rally Early

The best six months for owning stocks can begin in October or early November and usually lasts until April or early May for DJIA and S&P 500. However, seasonal strength for technology stocks, measured by NASDAQ, tends to last until June (“Best Eight Months”, see page 60 Stock Trader’s Almanac 2017). Due to its substantial weighting in technology, the S&P 500 also demonstrates a tendency to rally from late April until early June.

This trade has been profitable 62.9% of the time over the longer-term however; its recent track record has been rough, declining seven times in the last eleven years. Going long the September futures contract on or about April 27 and holding until on or about June 7 has worked 23 times in 35 years. The key to this trade is overall market trend and proper trade management as numerous sizable losses and gains have occurred over trade’s history.

Recent weakness has set this trade up for a potential win this year. In the S&P 500 chart below, you can see that monthly support (green dashed line indicated by upper blue arrow) has held and today’s gains have turned the Stochastic indicator positive and moved both MACDs very close to turning positive.