The Test Cometh

The S&P 500 is headed for a retest of the September highs. Volume has decreased only slightly, and stochastics have entered overbought territory as this index has climbed almost 10% in 12 sessions.

Historically, it is just not that likely the index will power through the previous highs and continue on to uncharted territory.

Countering that view is the historical track record, the ‘seasonal' of the markets for this time of year. The ‘Sell in May' crowd return to the playing field this time of year and institutions look to bump up year-end results.

Over the next 11 weeks, the S&P 500 has gained an average 3.8%. What is of greater note is that it has logged gains in 30 out of the past 35 years. An 86% success rate is high for any track record.

Overall, earnings season has not been a disappointment. A simple way to gauge it is to each day go to Briefing.com, the Calendars and then the Earnings section, and then click on ‘Yesterday'. Briefing.com shows all the major earnings announcements from the previous business day, and in the Actual column it colors the number red if the earnings were below expectations (the Consensus), green if they were above, and black if expectations were met.

For the past few weeks, every time I've checked it, the green lines and black lines have outnumbered the red lines. A simple but effective way to gauge the overall earnings picture. And this quarter there is good news on average.

You may still have a valid argument that many, even most, stocks are overvalued. That is a separate argument. External events, such as the Fed ending QE, may be a big influence. But at least earnings have stepped back as a major concern – for now. And with the seasonal tendency to rise over the next 6 months, a rally through the end of the year is more likely than the ‘30% correction is coming' views Marketwatch.com was peddling until the past week.

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, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 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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