Wasting Valuable Time?

Seasonal trends are just that for a reason.

They tend to repeat regularly enough that they become reliable enough to trade.

But the market has spent the last seven weeks moving through one of the strongest seasonal periods of the year, and it feels like it’s been wasted.

Over the last 20 years, the market, specifically the S&P 500, has shown strong performance from the 10th through 18th weeks of the year.

From that point, the seasonality trend becomes less reliable and more random.

Over those nine weeks, the S&P 500 historically averages a return of half a percent higher (0.5%) each week, adding up to a cumulative return of 4.5% for the nine-week period.

s&p 500 performance by week of the year

This year the period has yielded average gains of -0.3% a week and cumulative returns of -2.4%.

Keep in mind that this is the same seasonality that brought you the highly reliable October bottom in 2023, and for that matter brings the same performance year after year.

So, what does this mean for the market?

First and foremost, it puts a whole lot of pressure on the large-cap technology companies reporting this week.

Names like Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta (META) will all take the earnings stage later this week on Thursday. You never like to point at a day like that and say it’s a “must-win,” but you get the idea.

Also included in the mix this week is Tesla (TSLA) who will report Tuesday afternoon.

I’ll be frank and say that I don’t know what to expect from Tesla this week.

The company needs a “vision statement.”

From the appearance of things, the actual reporting numbers should be lacking. This is Elon Musk’s time to stand up and correct the growing problems at Telsa is now.

We’ll talk about this a bit later in the day.

Bottom Line

Let’s put our focus back on how to prepare for the week using the seasonal trends.

The market’s failure to follow its seasonal trends comes down to “unusual” circumstances.

Geopolitical concerns from the Middle East and the persistence of the inflation rate situation have caused us to deviate from what is normally a positive period for the market.

The problem is that I don’t expect that to stop, and the seasonal trends will shift to a more bearish tone at the end of this week.

That puts this week’s large-cap technology earnings reports in a must win situation. Good earnings results from Amazon, Google, and Microsoft will provide a short-term bump for the market that may give the spark needed to get this market back on the right trail.

 

 

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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