Stephen Suttmeier on Seasonal Market Trends and Technical Analysis

Seasonal Market Patterns

• 🗓️ Historically, the period from May through July often sees a summer rally in the stock market, with an average gain of 5.5% in the first year of the presidential cycle.
• 📈 This year, the May-July period significantly outperformed, with a 13.88% increase, which is nearly double the historical average.
• ⚠️ Seasonality tends to turn negative from August through October, suggesting potential market pullbacks.

Market Outlook and Key Levels

• 📉 A traditional October drawdown is a possibility this year, driven by weaker seasonal patterns.
• 📊 The market may consolidate in August and September, but a significant dip could see support levels tested around 5,900 to 6,100 on the S&P 500.
• 🚀 Despite seasonal weakness, the underlying cyclical uptrend that began in April may continue, with potential to rally towards 6,465 to 6,600 by year-end.
• 💡 A dip to test the 26-week and 40-week moving averages, around 5,900, would be considered normal within this uptrend.

Yield Curve and Interest Rates

• 📉 The 30-year Treasury yield may be forming a rising wedge, suggesting a potential downside break towards 4.4% or even 4%.
• 📊 The five-year yield could also be forming a distribution top, indicating a possible lower yield.
• 📈 These patterns suggest a potential steepening of the yield curve, implying that short-term rates might fall, supporting the idea of potential Fed rate cuts.

Market Leadership and Investment Focus

• 🏆 In a long-term secular bull market, largest companies tend to outperform smaller ones.
• 🚀 Growth stocks are currently outperforming value stocks across all market caps in the US, with new relative highs for Russell 1000 growth vs. value and S&P growth vs. value.
• 🌍 Internationally, however, value stocks are showing signs of breaking out against growth, presenting a different dynamic.
• 🎯 The current market environment favors a growth-driven, large-cap focused strategy.