June Outlook

The stock markets have gotten over with a strong May. At first glance, the rule "Sell in May…" doesn’t seem to have done the trick this year. So far, in 2013 the Dow, S&P 500and NASDAQ-100 have clearly followed the guidelines/the cycle of a "normal" post-election year.

Since 1985 the Dow has always achieved a positive result in the months of May in after-election years. This year the US stock markets have shown a hitherto immaculate series of five consecutive plus-months. After WWII the Dow succeeded in attaining something like this only in the years 1950, 1954, 1961, 1972 as well as in the years of five 1975 and 1995. Such an occurrence is to be observed every 10 years on average. It happens less frequently than a US recession for instance!

How did things use to go on? In 1972, 1961 and 1950 the following Junes proceeded negatively. In 1954, 1975 and 1995 however the positive series continued in the respective Junes and Julys: They were not broken before August.

That means: If the series broke they did in June already. If June was positive yet, also July kept on positive.

Since 2005 the Dow ended in minus seven times. So during the last eight years just in June 2012 the Dow Jones brought about a plus.

Since 1945 in an after-election year the Dow closed in minus 14 times in the respective June. Only twice the Dow was able to gain a + in a June of an after-election year.

The probability of a positive June 2013 seems to be pretty slight accordingly.

Even though we consider the performance of the last days (lower highs and lower lows on daily base) specially calling in the late decline of Friday, the last trading day in May, a lot is pointing to this: the overdue correction is getting on really well now. And the safest trade of the year comprised by the stock cyclicality/seasonality being to go short in May is still getting home and dry nevertheless, i.e. ending in profits: 

In the monthly chart and in the monthly 3 Candle GUNNER24 Up Setup with the May candle the S&P 500 is showing unambiguous exhaustion appearances. A very long upper wick hanging over the long-term resistance of the 4th double arc is showing that the 4th is not going to be overcome easily. But in the further course it will be likely to be broken upwards since May closed between the lines of the 4th. Certainly it did narrowly, but it did. The lower line of the 4th is at 1627 for May being our short-entry. Technically a closing price within the lines of a double arc always prepares the final break of the double arc in trend direction. The 4th would be broken upwards definitely in case of a monthly close of above 1670 (for June 2013) index points. In this case at 1850 index points (not visible above) the 5th double arc would be activated as the next uptarget.

But I expect now a correction for June. During the first 3 June trading weeks the markets are likely to trade weaker by and large. We’ll cover the shorts at the First Target in June at the center of the just passed square = an important horizontal support = 1595 MIT (market if touched). I’m rather careful not expecting first that the 2*1 Support Gann Angle will be broken on weekly base. The uptrend seems to be too strong… It will take a weekly close below 1580 to activate the maximum down-target for the correction at 1504 points.

The real force of the uptrend at the stock markets is clarified by the 3 Candle GUNNER24 Up Setup at the Dow Jones. In April 2013 the Dow broke its last main resistance, the 4th double arc, definitely and finally upwards. Objective and Main Target for the Dow are now 16270 points. This mark will be reached with a probability of a 75% - till spring 2014!

In the Dow the May exhaustion turned out much less noticeably than in the S&P 500. The index closed above the important 15080 horizontal that is likely to give a strong June support now. Beneath that the 2*1 Gann Angle is cruising being the timer for the actual uptrend (at 14940 for June). It is what the trend is based on since its re-conquest in March 2013. It is giving now the actual gradient angle in price and time. The 2*1 Angle is the actually strongest monthly support. Only if the 2*1 Gann Angle falls in June on weekly closing base (weekly close below 14920) there’ll be the possibility that the expected June mini-correction will develop into a mature 10% correction.

A test of the 4th double arc at 14230 points is the maximally possible correction target – with reaching the target in July. If this one happens to be reached we’ll go long there on monthly base!

In the extensive gold analysis of last Sunday I pointed to the importance of the 1413 and the 1422! Both marks were worked off last week.

I ascertained a week ago that each of both marks might release another sell-off move. On Friday gold topped at 1421.60 after Thursday had closed near the 1413.

The hefty sell-off on Friday is to be interpreted as to be unambiguously negative. Gold would have had the chance to close May at or even above the important monthly 1422 trigger mark. Thus it would have been able to generate a strong buy-signal. Instead it fell by almost 40$ from the 1421.60 high to the 1387 Friday close. Here you may read up why the 1522, the 1422 and the 1322 are now the very most important supports and resistances for gold.  

With the weak Friday performance gold has brought itself into an extremely precarious situation. With a new weekly close below the 1388 horizontal resistance again no rescue attempt succeeded. Moreover, last week newly didn’t achieve any close within the lines of the 4th. The 4th is a beast and it keeps on being one. Any price within the lines of the 4th may anytime release a mighty decline bringing new lows. Let’s now zoom into the surroundings of the 4th:

Seemingly next week will open exactly at or near the critical area at 1388. An important Gann Magnet is lying there. It’s the combination between the 1388 horizontal resistance and the lower line of the 4th. Immediately with opening gold is going to be confronted with a problem, a battle… The resistance-function of the lower line of the 4th is supposed to be willing to go on pressing gold down by opening. If gold manages then to turn at 1380 or to maintain this mark by and large there’ll be the hope that the 4th will be taken upwards finally in the course of next week

If gold achieves to close above 1400 again on Monday or Tuesday we’d have a strong indication that the worse is really ridden out now. Two consecutive daily closings above 1400 would be a pretty safe clue that gold will have overcome the lower line of the 4th permanently.

But I’m not really prepared for believing in this scenario at the moment. At first the lower line of the 4th is a continuing existing powerful resistance. Lately it showed it claws last Friday. Why should it be different on Monday? Secondly a weak Friday always points to a continuation of the weakness on Monday. I.e. with a high probability Monday will be week, too, ending in a minus.

If the strong downtrend of Friday wants to continue on Monday the 1380 support Gann Angle will be in danger! As early as on Monday it might break. If so, gold may be handed through very fast to the next lower, the very most important weekly support, which is the 2010 Support Angle. The 1337 might be reached within a couple of hours on Monday!

New lows, a daily close below 1322, would activate the next lower weekly support at 1274!

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Be prepared!

Eduard Altmann