The StockTradersAlmanac, closely watched investor newsletter, has officially issued its “Best Six Months MACD Seasonal Sell” signal for both the Dow Jones Industrial Average (DJIA) and the S&P 500, indicating the start of what is traditionally seen as the "Worst Six Months" for these indexes.
S&P 500 and DJIA could head lower soon
As of Tuesday’s close, slower-moving MACD (Moving Average Convergence Divergence) indicators for both the DJIA and the S&P 500 have turned negative, market analysis firm StockTradersAlmanac said.
Consequently, the Almanac issued its Sell Signal for both indices.
This strategy, rooted in historical market analysis, suggests that now is the time to sell positions in the SPDR® Dow Jones Industrial Average ETF Trust (NYSE:DIA) and SPDR S&P 500 (NYSE:SPY) ETFs.
“For tracking purposes these positions will be closed out of the portfolio using their respective average prices on April 3,” the market commentary provider said.
However, the strategy advises continuing to hold positions in the Invesco QQQ Trust (NASDAQ:QQQ) and iShares Russell 2000 (IWM), as the NASDAQ's "Best Eight Months" period does not conclude until June.
The Almanac Investor said a sell signal does not mean an outright exit from the market but rather a strategic reallocation of assets.
It plans to introduce several low-fee ETF options for reallocating funds from sold positions, ranging in risk from low to potentially higher rewards, tailored to individual investment goals and risk tolerance.
“Please, consider your individual risk tolerance and investment objectives when choosing,” it stated.
Moreover, those who follow the Best 6 + 4-Year Cycle switching strategy, as detailed in the Stock Trader’s Almanac 2024, are reminded that this seasonal sell signal may not apply directly to them.
“However, it is still a good reminder to review existing holdings and consider a cautious stance,” Almanac Investor noted.
The issuance of the Sell Signal does not mean selling and going away, Stock Trader’s Almanac highlighted.
“Instead, today’s trades are the start of tactical adjustments that will be made in the portfolios. Between now and when NASDAQ’s Seasonal MACD Sell Signal triggers (earliest it can trigger is on June 3 this year), the portfolios will be shifted toward a neutral stance,” it explained.
Positions known to fare well during the "Worst Months" will be maintained, alongside those aligned with the NASDAQ and Russell 2000 performance.
S&P 500 closed 0.7% lower on Tuesday, retreating to the 5,200 level after hitting a new all-time closing high last week.