Let's take a quick look at the major indexes. They are on the verge of possibly confirming a change of character and direction.
The Dow is the best looking, not yet showing a break of recent support. Volume is picking up as it approaches that support.
The S&P 500 looks similar.
The NASDAQ Composite is right at recent support. With yesterday's solid down-close, a break of that support may indicate a larger pullback is starting.
IWM, the ETF based on the smaller-cap Russell 2000 index, has already broken recent support, and volume is picking up significantly.
The question I ask at this point is what are the track records, the seasonal patterns, of these indexes for this time of year? There are upward biases in the major indexes most of the time. I don't typically find many sharply negative seasonals in the indexes, but a lack of an upward bias would show that institutions may have a track record of pulling back from the market and lightening positions this time of year.
That is exactly what I found. IWM has lost an average 0.7% over the next 4 weeks. The losing years versus gaining years is only slightly better than 50-50, but it at least shows there isn't a strong upward bias this time of year. Q1 earnings announcements haven't had a noticeable net effect on the market, on average.
While it hasn't resumed its upward climb, the market has recently been shrugging off bad news. This may only be a small, temporary pullback – ‘the pause that refreshes'.
But news, or a few bad earnings reports, could change sentiment in a hurry.
I've been cautioning my readers to take defensive actions recently. Spending extra time this weekend going through numerous daily and weekly charts to get a feel for a change of momentum could be time well spent. Look carefully at any open positions. Make sure you are completely comfortable with your position(s). If a trade keeps you awake at night, it is a bad trade.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
By Gregg Harris, MarketTamer Chief Technical Strategist
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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