Ok, so how far can this bear market rally run? The first level
that jumped out was the February 24 intraday low on the first day of the
Russian invasion of Ukraine. DJIA blew through that 32273 level. S&P 500 is
finding resistance near its March lows around 4170. NASDAQ has yet to reclaim the
Feb 24 or March 14 lows around 12500.
Next barrier is the 50-day MA around DJIA 33500 and S&P
4250. NASDAQ needs to get through 12500 before its 50-day comes into play around
12750. DJIA can probably get up to 33500 or 34000 near its December closing low
and the early May high, a 9% gain from the May low.
S&P will likely have trouble getting through 4250 or
4300 around its 50-day MA and May high, about a 9-10% rally off the low. NASDAQ
has yet to take out its March lows but was up 9.3% from the low at last week’s
high. 12500 looks formidable, which would be an 11% bear market rally.
We suspect this bear market rally will stall mid-month around
the 50-day MAs as quantitative tightening kicks and the Fed raises rates
another 50 bps at the June 15 meeting. Stocks tend to slide into the summer
doldrums after June Triple Witching.
S&P 500’s midterm year pattern highlights June’s
midterm weakness. Since 1950 June is the worst DJIA & S&P 500 months,
2nd worst for NASDAQ and Russell 2000. Selling tends to accelerate later
in the month in conjunction with Triple Witching.
2022 continues to track the seasonal trend of midterm election
years, especially the two more ominous patterns of 1st term midterm years and
the 2nd year of new Democratic presidents with late Q2 lows and a retest or
lower low in October.