Monday, June 2, 2014

Keystone's June Seasonality Factors for Trading the Markets

The "Sell in May and Go Away" expectations are no where to be found, so far, as May logs a strong up month. The month of June is typically up about +0.2% on average so a flat to small gain would be expected for this month. The largest stock market gains are made from November thru April while markets are typically flat from May thru October. The tech sector slows thru the summer. The homebuilders tend to be weak April thru July.

June is the kickoff for Hurricane Season. The season ends in early November. When a hurricane starts moving across the Atalntic Ocean headed for the East Coast or Gulf, oil and natty gas prices typically escalate in response to oil rigs and terminals shutting down for the storms. Home-supply stores such as HD and LOW typically move higher as hurricanes approach. The news channels will run video clips of patrons leaving the stores with plywood (to board up windows), generators and other storm preparedness items to whip up the excitement. GNRC supplies generators and catches a bid each time a storm develops. URI supplies rental equipment once the storm clean-up begins. Also take a look at insurers such as ALL. Other possible hurricane plays are HRC, NUE, OC and TTC.  Electric and energy grid companies are worth watching as well such as MTZ, MYRG, GE, ENOC, AMSC, CPST, PWR, SSNI, etc...

May and June typically hosts many conferences in such sectors as banking and biotech with traders already positioned ahead of time. The ASCO cancer conference and ADA diabetes conferences occur in May-June so tickers such as JNJ, CELG, SPPI, BMY, AZN, ALKS and others may see activity. Markets have been down 20 of the last 23 times for the week after June triple witching; this is the week of 6/23/14. Russell 1000 and 2000 rebalancing typically occurs at the second to last Friday which would be 6/20/14 this year causing lots of volume and movement in the tickers affected for the end of the month.

June is the official end to the second quarter, EOQ2, and the end to the first half of the year, EOH1. Window dressing comes in to play to end the month of June since it is quarter and half-year end, so typically market buoyancy occurs in the final week of June. This conflicts with the down week expected after OpEx so this year the OpEx week of 6/16/14 may be weaker than expected moving into the window dressing. The last couple days of June typically finish flat. Thus, the back half of June is typically weak the week after OpEx but then markets recover moving into the end of the month. Markets tend to develop a trading range for the summer months. June is typically a bad month for the XHB, XLI, XLF, XLP and XLY sectors.

Keystone's Eclipse Indicator targets 5/22/14, give or take a couple weeks, as an area where a major market top may occur. This window closes this week so if the market bears are going to run lower now is the time.

The ECB Rate Decision and Press Conference is Thursday, 6/5/14, and Draghi is expected to provide stimulus to weaken the euro and help Europe recover from the economic malaise. The Monthly Jobs Report is Friday, 6/6/14. Retail Sales 6/12/14. A full moon occurs 6/13/14, Friday the 13th, and markets are typically bullish through the full moon. Housing Starts are 6/17/14. The FOMC Meeting and Rate Decision is Wednesday, 6/18/14. Markets are typically bouyant on OpEx Monday, 6/16/14, and typically rally from a Tuesday low, 6/17/14, into a Wednesday high, 6/18/14. OpEx is Friday, 6/20/14. Consumer Confidence 6/24/14. GDP 6/25/14. A new moon occurs on 6/27/14 and markets are typically bearish moving through the new moon. Markets typically log a down week after OpEx although window dressing will be in play at the end of the month. The month ends on Monday, 6/30/14; EOM, also EOQ2 and EOH1.

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