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Stock market: will the new quarter bring new money?

Stock market: will the new quarter bring new money?
Stock market: will the new quarter bring new money?

 


As a new quarter approaches, investors are eager to see if new capital will flow into the stock market. With economic indicators showing mixed signals and a pause from the Federal Reserve, market participants are closely watching for signs of renewed investment.

Will the promise of slowing inflation and a possible round of Fed easing attract more money into the markets, or will consumer fatigue and unequal distribution of wealth hold back enthusiasm?

As the second quarter ends this week, investors will be eager to see if the bull market continues into the third quarter. Looking at the S&P 500 (SPY) performance, year-to-date returns have reached 15%. With one week to go until the end of the second quarter, the SPY returned just over 4%. Compared to the first quarter, the return was around 11%.

Source: bar chart

Technically, the SPY still appears bullish, while the uptrend remains intact. Internally, market experts continue to find reasons why the market is falling.

A report explains that declining short interest makes the market vulnerable to a downturn. Excessive technology purchases and sentiment lead to some concerns about the need for a lateral or corrective market movement. There is never a shortage of contrarian ideas about markets.

While these arguments may have some validity, the fact is that the market continues to advance. The market will eventually decline, but timing the peak of a bull market can leave investors and traders with smaller financial accounts.

In a recent article for Barchart, “The Nasdaq market has a perfect bullish historical pattern, don't sell in May!” I wrote, “Sell ​​in May and come back after Labor Day,” is a well-known stock market adage that suggests investors should sell their stocks in May and return to the market after Labor Day in September. But, like so many market clichés, statements that aren't supported by historical data are meaningless. An example is the upcoming Nasdaq seasonal buy with a perfect 15-year all-time high.

Source: Moore Research Center, Inc. (MRCI)

A chart updated after the start of the optimal seasonal buying window shows that Nasdaq futures were up nearly 32% before the recent market pause. Stock index correlations are high enough that these substantial seasonal opportunities can impact each one. As the market maxim says, “A rising tide lifts all ships.”

The seasonal bullish window of this stock index is supported by another window of lower interest rates, significantly supporting rising stock prices. In other articles for Barchart, “Long-term yields are about to fall. Mortgage rates are falling near” And “The seasonal trend of falling interest rates is gaining momentum,” I discussed the seasonal trend of interest rates falling between May and the end of August each year.

Bullish model?

Source: bar chart

A popular study detailing the internal strength of the S&P 500 is the number of stocks in the index above their 50-day moving average. The indicator below 50% may reflect weakness, as more than half of S&P 500 stocks trade below their 50-day moving average and show strength when trading above 50%. You can find this study on Barchart using the symbol “$S5FI“.

Last week's performance saw the indicator close above the 50% line for two consecutive days.

Will this attract more bullish sentiment as the second quarter closes this week?

Seasonal model

While the Nasdaq is enjoying a recent bullish seasonal buying window, the Dow also has an opportunity to shine. With a bullish tailwind from lower interest rates through August, the Dow is experiencing similar seasonal buying.

It is important to note that while seasonal trends can provide valuable information, they should not be the sole basis for business decisions. Traders should consider other technical and fundamental indicators, risk management strategies and market conditions to make informed and balanced trading choices.

Source: MRCI

MRCI research found that the Dow Jones has an all-time rally record during the seasonal window above (yellow bar). The blue line is the 15-year price average. Their research indicates that the Dow Jones has closed higher around July 23 compared to June 28 in 15 of the last 15 years, a 100% historical trend. The dates of this rally correspond to the beginning of the third quarter, when new capital was historically introduced into the market. Additionally, there is an alignment with the seasonal trend of falling interest rates that generally supports the stock market.

Source: MRCI

MRCI research reveals seasonal patterns with good historical returns and minimal losses. After looking at this pattern over the last 15 years, I found that six of those years never had a daily closing decline.

In conclusion

As the second quarter ends, investors wait anxiously to see if new capital will flow into the stock market in the new quarter. Despite mixed economic signals and a pause from the Federal Reserve, the S&P 500 (SPY) has performed strongly with a return of 15% year to date. However, concerns about consumer fatigue and unequal distribution of wealth persist.

Technically, the market remains bullish, although some analysts warn of potential vulnerabilities. Historical data suggests that the Nasdaq and Dow Jones could benefit from seasonal buying windows and lower interest rates, indicating possible continued gains. Although these models are optimistic, investors must balance them with technical and fundamental analysis to make informed decisions. As the new quarter begins, all eyes will be on the market to see if the uptrend persists.

More Stock market news from bar graph

As of the date of publication, Don Dawson had (directly or indirectly) no position in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. For more information, please see the Bar Chart Disclosure Policy. here.

Sources

1/ https://Google.com/

2/ https://www.theglobeandmail.com/investing/markets/indices/TXCX/pressreleases/26986274/stock-market-will-new-quarter-bring-new-money/

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