With major benchmarks trading near highs in a seasonally weak period for the equities market, U.S. stock exchange traded funds may have more room to run.
Over the past month, the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO) remain flat after the S&P 500 touched an all-time high in late May. [U.S. Stocks, ETFs Can Still Push Higher in Rising Rate Environment]
“It’s very rare and unusual for the markets to peak out for the year in May or June,” Jonathan Krinsky, chief market technician at MKM Partners, said on CNBC.
The S&P 500 is trading about 26 points, or less than half a percentage point, below its 2,134.72 high set on May 20.
Over the past 86 years, Krinsky calculated that the S&P 500 made a calendar-year high only once in the month of June and twice in the month of May.
“This suggests that even if there is weakness into the summer, a higher high should be made by year-end,” Krinsky added.
Between 1928 and 2014, the S&P 500 has typically made the most calendar year highs in December, followed by January and November. As many market participants know, these months correspond with the economic boost experienced during winter holiday season.
Despite concerns over rising rates and elevated valuations, Krinsky argues that the markets remain healthy.
“It’s important to look at what’s actually happening in the market as opposed to what the Fed may or may not do,” Krinsky said. “We’re seeing some very good reading under the surface. We’re seeing new all-time highs from the small caps, the micro caps and the mid caps. And more importantly, we’re seeing the highest reading of stocks at one-month highs than we’ve seen since March.”
Krinsky, though, warned that there is still a chance of a late summer sell-off, but a pullback could set up a buying opportunity, which could help push the broader equities market to the upside and improve chances of a later calender-year high. The analysts sees a resistance in the S&P 500 at 2,130 and projects the index could rise another 3% from here, or put the benchmark above 2,180 in the second half.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of IVV, SPY.