E Major Indices Are Tracking Historical Patterns

Market Outlook

With nearly a fifth of quarterly earnings results out, investors are divided on how early corporate reports are serving as an indicator of the overall health of the U.S. economy, and that could contribute to a volatile week as stocks linger near record highs. Earnings so far are confirming less-than-stellar economic data recently, said Paul Nolte, portfolio manager at Kingsview Asset Management. In the Almanac Trader, Jeff Hirsch talked about how the market is starting to line up with the typical July seasonal trading pattern. Based upon July’s recent 21-year performance chart DJIA, S&P 500, Nasdaq Russell 1000 and Russell 2000 have all tracked closely to the historic pattern and the 14^th trading day of July, has been frequently been the beginning of the summer soft spot. It is also worth noting that the first nine trading days of August are notoriously weak. While it is encouraging that all the major US averages have just hit new all-time highs and done so many times this year. This is usually the time when markets are prone to a retreat. Throw in congressional dysfunctions, investigations and presidential legal battles on top of tepid fundamentals, frothy sentiment and an overbought, cantilevered market; we are ripe for a fall. The updated graph below shows that all the major asset classes are higher since the beginning of the second quarter. The Nasdaq continues to lead the market higher as it has over the past eighteen months.