Traders have an interesting dilemma this year regarding the Best 6 Months of the Year and the MACD. According to data compiled by the Stock Trader’s Almanac, the time to go long the S&P 500 is October – November when the MACD gives a buy signal. This year the MACD buy signal morphed into a wicked headfake in early November. Worse, the MACD is giving a sell signal.

SPX stock chart

For traders following the seasonal trading pattern, this causes a significant dilemma given that we are in the Best 6 Months of the Year (November – April). Do you go long the seasonal pattern or do you go short because of the MACD sell signal today?

A big range of support is directly below between 2530 and 2600, an area that has held during every selloff in 2018. Resistance is now the previous level support around 2680.

We have yet another company that released a good earnings report but yet it sold off. Kohl’s (KSS) beat its earnings estimates and even raised guidance. It trades with a P/E of 14 and grew EPS this quarter by 40%. The problem is that retailers and really most of the market is being sold right now. The institutional traders and quant trading desks have programmed selling into their HFT bots. The idea is that the logic has been programmed in to lighten up on equities but only into upward moves. Each time a company beats and the stock moves above the mean, automated selling kicks in so that institutional traders can unwind some of their position in equities. Until that programmed logic is removed, the market will continue to sell off into upward moves. Knowing this then, you have to stay in cash as price action (mean regression) is more than fundamental earnings reports. That’s a very dangerous market folks.

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