Typically, “window dressing” occurs on the last trading day of a quarter. Stock fund managers buy top performing stocks on the last trading day of the quarter to show they have these winners in their portfolios. This usually causes an upward move in at least one of the three main indices. The S&P 500 (SPX) new all-time high on 06/30/21 may have been caused by “window dressing” if so today 07/01/21 could have been a down day for the SPX and perhaps the other two main stock indices. On 07/01/21 all three main US stock indices moved up with the SPX making another new all-time high.
Broader seasonal patterns are bearish for US stocks May to October. If there’s no, or only a small decline during May to June, then sometimes August can be a peak just before the strongest part of the bearish season September to October.
The rise of all three main stock indices on 07/01/21 implies the buying on 06/30/21 was not a last gasp of some portfolio managers to “look good”. There’s a possibility the US stock market could continue to slowly plod higher into August.
Evidence continues to suggest that US stocks are in the area of what could be a major top. The margin debt chart courtesy of Advisor Perspectives shows FINRA margin debt to the SPX though to May 2021.
The chart is adjusted to present day dollars and is the reason why the SPX 2007 peak is below the SPX top in 2000.
Margin debt as of May 2021 is far above the levels achieved at the major stock market tops in 2000 and 2007. The willingness of traders/investors to use margin is a sign of complacency. As of May 2021, the fear of buying stocks is low – that could soon change.
Today the SPX moved above 4310.00 triggering a stop loss on 50% of a short position started on 06/21/21 the loss was 1.6%.
The door is open for a rise into August, there could also be a major top anytime between now and August. There’s an enormous amount of evidence that suggest a major peak in US stocks is developing. Whenever a decline begins it could be much deeper and faster than what most traders are expecting.