Why Veteran Market Technicians Are Worried About The Summer Stock Rally

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Inflation is falling, the Fed has paused rate hikes and stocks are once again on the move. Will the springtime rally turn into a sustainable bull market?

Year-to-date changes in the S&P 500, Russell 2000, and Nasdaq Composite.In 2007, the markets had similar occurrences prior to the financial crisis. Stack is not predicting another crisis, but said this summer’s macro economic and technical indicators point to a riskier environment for investors.

The Conference Board Leading Economic Index , another indicator for a looming or present recession, has also fallen for 13 months, creating a stronger case for a recession.Stack added that longer bear markets tend to include smaller bull markets. At the height of the Great Depression from 1929 to 1932, there were five bull markets. During the tech bubble in 2000, there were two bull markets by Wall Street standards.

David Keller, Chief Market Strategist at StockCharts.com, called a strong start to June “abnormal” because June is historically one of the worst performing months. However, Keller pointed out that the S&P 500 was overbought this week after the bullish news, and traditionally overbuying means a drawing a close on a bull market.

 

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