With nearly a century of data, it’s clear that the U.S. stock market is a captivating maestro, orchestrating moves that bewilder even the most seasoned investors. In 2024, amidst whispers of regional banking concerns, burgeoning inflation, and the ominous specter of recession, stocks have defied gravity, scaling the Wall of Worry propelled by the blazing inferno of growth in the A.I. sector and the unassailable might of tech giants like Apple (AAPL), Nvidia (NVDA), and Meta Platforms (META).

As onlookers ponder the longevity of this equity bull market, it’s striking how the course of action hinges on a simple yet profound factor: time. For the steadfast, long-term investor diligently sowing their capital into the S&P 500 Index, the path is clear – continue the ritual of dollar-cost averaging. Historical whispers suggest that a bullish breakout after such a fervent start typically heralds more gains, extending the robustness of the market. Yet, for the tactical traders adrift in these soaring heights, the risk-reward balance no longer waltzes in their favor.

Questioning the Shadow of a Late Summer Market Correction

This year offers us another chapter in the timeless saga of attempting to prophesy market peaks or downturns within a bull market – a task as Sisyphean as taming the tempest. However, calibrating the scales of risk and reward with the tools of data can be a noble undertaking. Should the scales tip unfavorably, it might be prudent for investors to tuck away some funds, primed to seize the dip in equities. Here are five portents indicating a potential late summer descent in U.S. stocks:

1. A Glimpse into Historical Market Seasonality Trends

Take heed of historical whispers that murmur tales of the Nasdaq rallying till mid-July, pausing in reflection till late October, and then marching forth into the year’s embrace. On this occasion, the Nasdaq deftly dances in step with this age-old melody.

Image Source: AlmanacTrader

2. The Enigmatic NAAIM Exposure Index

The NAAIM Exposure Index, whispering the secrets of the active investors’ dalliance with the U.S. equity markets, now orchestrates a sonorous 103 reading – a melody that foretells of full investment, perhaps edged with a tinge of margin. History recalls three previous occasions veiled in such attire, each unwinding into a short-lived market correction.

Image Source: NAAIM

3. The Chorus of Slim Leadership

As the mega-cap titans hoist the market higher on their Herculean shoulders, data signals a symphony that verges on the extreme. The melody of the S&P 500 stocks outshining the Index itself dwindles to the lowest ebb in history, painting a worrisome portrait (data via Dean Christians).

Image Source: SentimenTrader

4. The Threshold of Moving Averages and Round Numbers

The Nasdaq 100 ETF (QQQ) finds itself perched more than 8% aloft its 50-day moving average, a precarious stance seldom sustained. The looming horizon of the symbolic $500 milestone draws closer, hinting at a possible correction or a meandering sideways saunter in the days ahead.

Image Source: TradingView

5. Election Jitters in the Air

The pre-election panorama, ensnared in an intricate web of uncertainty, often breeds a tempest of volatility in the realms of an election year. Today, amidst the haze of electoral discord, whispers swirl of potential upheavals in the Democratic ticket, a testament to the divisive mists enveloping the nation. Brace for turbulent storms ahead, for the election uncertainty portends a ballet of ferocious trading.

Bottom Line

The curtains have risen on 2024 with a grand flourish of incandescent promise in the realm of stocks. Yet, as the symphony plays on, subtle notes waft in the air, hinting at a potential brief interlude of correction.