Sell in May and Miss Out?

In last week’s shortened trading week, we saw stocks broadly rebound to cap off the first positive month for the S&P 500 since January. During the month of May, the old market saying, “sell in May and go away” certainly did not play out as the S&P 500 rallied 6.2% in this month alone. This was a strong continuation of the recovery rally that we have experienced since early April. When markets opened for trading on Tuesday, stocks gapped higher on the back of news that many of the tariffs had been declared unconstitutional by a lower level Federal court. This ruling was cheered by the markets, however, it did not last long. Investors quickly determined that even if the ruling stands, it would not likely mark the end of our trade disputes. To the credit of many investors, they did not allow the waning enthusiasm about the court decision to lead to any panic selling. The result was just a slowing in momentum behind stocks which saw the S&P 500 trade up to a current level of resistance, roughly 5950, that it has not yet cracked in this latest push higher. Additionally, even though stocks did not break out to new short term highs, throughout the week we did get a few more positive bits of news for stocks which will be supportive moving forward. The one major earnings report we were watching for last week delivered fantastic results as NVDA produced a top-line and bottom-line beat. This provided a boost for NVDA as well as many of their colleagues which are closely linked to the A.I. revolution. Also, investors got a reprieve as long term U.S. Treasury rates backed off after their recent rise. Then finally, investors got one more positive piece of news when the April PCE inflation report on Friday showed that headline YoY PCE had cooled to 2.1%, a larger decline than was expected. All of these positive headlines will add support to the bullish case for stocks and eventually assist them as they challenge the current all time highs.

Not only did last week’s trading close out a strong month of performance for stocks, but it also provided further bullish technical signs for the short term. Last week’s trading indicated additional success after the retest of the 200-day moving average. In the week prior, we had traded down to this key support level and closed higher off of it. Then this week’s trading bolted higher, with each day finishing well above the 200-day MA, and instead challenging a current ceiling of resistance. Furthermore, the S&P 500 index Advance/ Decline line showed a reacceleration of stocks moving higher after slipping the week prior. This is a strong signal that we still have a wide breadth of stocks showing upside strength. Also, Friday’s trading concluded with a clear ‘bullish hammer’ pattern on the day’s chart, a reliable signal that the index is primed for a push higher. Now, while the S&P 500 is currently near its recent short-term high, it would not surprise me to see the index break through this level and then consolidate some of these gains for a period. Since the early April low, the S&P 500 has rallied 22.3%, so an opportunity for stocks to catch their breath is certainly warranted. For the weeks to come as we head into summer, I expect that the S&P may have a little more room to the upside before trading sideways and becoming rangebound before ultimately making new highs sometime throughout the summer. Of course, this projection could all change pending updates regarding our trade policy. An update of true substance about our trade deals with top trading partners could put pressure on stocks in either direction.

🚨 Have you heard about my WPO Newsletter that recently gave my members the chance at a 148.9% profit opportunity? Of course not all recommendations work out this well but if you want to receive the next alert, go ahead and Click Here to begin your trial for JUST $1 Today! 🚨

Small accounts can lead to big gains. Click here to see how.

Key Events to Watch For

Trade Policy/ Treasury Yields (10-Year Yield)
May Job’s Report
Key Tech Earnings (CRWD & AVGO)

Following a mostly stagnant week regarding trade policy updates, I expect in the weeks to come, as we near the end of key tariff pauses, investors will begin to demand more clarity and finality on key trade deals before pushing stocks too much higher. Even as investors have become seemingly somewhat calloused to the noisy day to day tariff headlines, our nation’s future trade policy is still very much the tail that wags the dog when it comes to where markets are headed. There is increased optimism that peak tariff uncertainty is behind us and that we are now closer to resolving these trade disputes. However, should this prove to not be the case and trade uncertainty reaccelerate, this could put some pressure on stocks over the summer. Additionally, even as we saw long-term U.S. Treasury yields cool meaningfully over the past week, this area still deserves much attention from investors. That said, should Treasury yields sink lower from here, this will be quite supportive for stocks. This coming week we very well could get this next meaningful catalyst for the trajectory of Treasury yields, which I will discuss next.

As Wall St. has become increasingly concerned with heightened U.S. Treasury yields of late as the 10-Year yield has topped 4.6% on a handful of occasions, one major report this week is almost assured to facilitate the next notable move in yields. On Friday, before the market opens, the fresh Job’s report from May will be released. This up to date report on the health of the U.S. labor market will move yields either up or down pending the results. Expectations are that the unemployment rate will remain at 4.2% and that the U.S. economy will have added 125K jobs in May. If the report bears this out, meeting or surpassing expectations, this will prove the economy is still on solid footing, likely providing another boost to yields moving them higher. This Job’s report due at the end of the week is going to be a crucial one to watch.

As Q1 earnings are all but wrapped up, there are two key Tech companies that are due to post their earnings results this week. One company is among the top cybersecurity providers in the world and the other is one of the top semiconductor designers. On Tuesday, once the market closes, CrowdStrike Holdings, Inc., symbol CRWD, is expected to report Q1 EPS of $0.66 per share. Additionally, on Thursday after the closing bell, Broadcom Inc., symbol AVGO, will report their Q1 numbers. Analysts’ expectations are that AVGO will report $1.56 in Q1 EPS, a nice 41.8% YoY growth rate in their Q1 earnings. Each of these companies is a key bellwether for crucial parts of this bull market, cybersecurity & A.I. Expect these companies’ reports to not only move their own shares prices but also they will likely have a knock on effect on their peers.

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

Thanks,