As usual end-of-Q2 weakness, especially in the week after June’s option expiration week, setup of NASDAQ’s mid-year rally quite nicely. Immigration policy issues at the Mexican border added to this perennial weakness providing a solid entry opportunity for NASDAQ’s mid-year rally. Typical early July strength at the outset of Q3 has given the mid-year rally a healthy boost. But continued trade battles, more tariffs and tough Trump talk with his European counterparts has spooked the market, shaving some points off this rally. It may be time for an early exit from this trade that ends Friday.
In the mid-1980s the market began to evolve into a tech-driven market and the market’s focus in early summer shifted to the outlook for second quarter earnings of technology companies. Over the last three trading days of June and the first nine trading days in July, NASDAQ typically enjoys a rally. This 12-day run has been up 25 of the past 33 years with an average historical gain of 2.4%. This year the rally could begin on or around June 27 and last until around July 13.
After the bursting of the tech bubble in 2000, NASDAQ’s mid-year rally had a spotty track record from 2002 until 2009 with three appearances and five no-shows in those years. However, it has been quite solid over the last eight years, up seven times with a single mild 0.1% loss in 2015. Last year, NASDAQ advanced a respectable 2.7% during the 12-day span. As of today’s close NASDAQ is up 2.0% since the close on the 4th to last trading day of June.