Both the faster and slower moving MACD indicators applied to NASDAQ remain positive, but have begun to weaken, setting up nicely for a sell signal. The slower MACD indicator is pointed out with a red arrow in the following chart. With NASDAQ’s additional loss today, a one-day decline of about 2.8% (about 138 points) would be needed to turn NASDAQ’s MACD Sell indicator negative. This is about 60% of what was required two days ago on Tuesday. The pace of NASDAQ gains continues to moderate.
The Russell 2000 has been leading the major U. S. averages since the May lows, but appears to be stalling at projected monthly resistance (red dashed line). Even if it continues higher through monthly resistance, Russell 2000 is likely to stall around 1200, its highs from last November/December. Although we do not officially track the Russell 2000 MACD Indicator for our seasonal switching strategy, it is also positive, yet weakening like NASDAQ (red arrow in next chart).
When NASDAQ’s MACD Sell indicator becomes negative, we will issue our NASDAQ Seasonal MACD Sell signal and begin clearing out remaining technology and small-cap positions held in the Almanac Investor ETF Portfolio and present some potential short stock trades later this month.
Believe It or Not Market Voting Clinton at the Moment
After a rocky start to the year stocks found support in mid-February and have gained some traction over the past few months. But they have yet to take out the highs of last year and appear poised for a soft patch this summer and fall. So with the S&P 500 in the black for the first four and five months of this election, it is basically a Wall Street vote for Clinton.
It’s not just the old tongue-in-cheek Harry Truman line, “If you want to live like a Republican, vote Democratic.” It’s traders and money managers bidding up the market as they feel Clinton is the more likely winner and they have a better handle on what to expect as she is likely to continue many Obama policies, Trump on the other hand is having difficulty transitioning to a general election rhetoric and continues to lag in republican leadership support and fundraising. Meanwhile, the Dems seem to be solidifying the party and rallying around Clinton. The devil Wall Street knows vs. the devil they don’t.
Although weaker in recent times, election years are traditionally up years. Incumbent administrations shamelessly attempt to massage the economy so voters will keep them in power. But, sometimes overpowering events occur and the market crumbles, usually resulting in a change of political control. A surge by Trump on the national stage and with republican leadership and fundraisers could overpower the current bullish tone on The Street. While we expect a soft patch over the summer and leading up to the election, the year as whole should be mildly positive. Next year is a different story.
The table below presents a positive picture for the last seven or eight months of election years and the entire year following gains in the first four and five months of the year. We have highlighted in grey the last three down election years, when the first four and five months were also down.
![[TABLE]](/UploadedImage/AIN_0716_20160609_First5Last7YearElection_S&P.jpg)
Years when the incumbent party was defeated are noted by and asterisk. Several of those years had market gains in the first four and five months and/or the year. These years were plagued by some upheaval. In 1952 popular incumbent Truman chose not to run. Johnson chose not to run in 1968, Bobby Kennedy and Martin Luther King, Jr. were assassinated, third party candidate George Wallace, a violent Democratic convention and Vietnam conspired to oust the Dems. Ford lost to Carter in 1976 on the bitter heels of Watergate. The 1980 Iran Hostage Crisis, a bad economy with high unemployment and high inflation and third party candidate John Anderson paved the way for Reagan to sweep Carter. Bush’s broken campaign promise of “Read my lips, no new taxes” and third party candidate Ross Perot handed the White House to Clinton in 1992.
However, since 1948, investors have barely been bruised during election years, except for a brief span early in the year—until 2000 and then again in 2008. In both years a bubble burst: technology and internet stocks in 2000 and credit in 2008. Barring another massive regulatory failure, financial crisis, political miscalculation or exogenous event, the last seven months of 2016 should be positive, notwithstanding a summer and/or fall swoon.