Mosaic Chart Alerts

S&P 500: Buy in May and Stay to Play.

In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup.

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Stock Market Update

The minutes of the Federal Reserve’s most recent rate-setting meeting reaffirmed the uncertainty facing the central bank due to tariffs and the trade war. The minutes specifically stated that the Fed might face “difficult tradeoffs” if the economy weakens while above-target inflation proves persistent. Several leading indicators of inflation point to accelerating trends down the road, including the prices paid component of various manufacturing sector surveys. The Personal Consumption Expenditures Price Index (PCE), which is Fed’s preferred inflation gauge, is scheduled for release this week. Forecasts point to accelerating headline and core PCE inflation in the months ahead (chart below).

Concerns over rising inflation means that monetary policy will stay restrictive and short-term interest rates will remain at elevated levels. Longer-term rates like the 30-year Treasury yield is close to a key breakout higher. While rising yields have weighed on stock prices recently, the S&P 500 is still on track to close out May with a gain of more than 5%. Strength in stock prices during the start of the “sell in May and go away” period tends to bode well for the rest of the year. One-year forward returns when May delivers a gain of 5% or more have never been negative for the S&P 500 and averages nearly a 20% gain (chart below).

Chart from Ryan Detrick on X

While the month of June tends to be weaker from a historical seasonal perspective, the recent price momentum coupled with breadth thrusts following the April lows remains a tailwind for the long-term outlook. Bearish positioning from institutional fund managers that I covered in this week’s Market Mosaic should be another bullish demand catalyst for equities as we near the second half of the year. Several positions on our watchlist would still benefit from a smaller pullback to form the right side of their base, while several stocks in the natural gas sector are setting up bullish chart patterns. Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.