Pre/post Memorial Day price weakness nearly always leads to an early June low followed by one of the most historically consistent rallies during the calendar year. Last week’s declines (expanding the Holiday weakness) was on schedule. Now the question is does the historically reliable seasonal tendency during the early summer of that weakness into June expiration lead to a recovery rally by the July contract in place. Prompt July has traded through the calendar May high in each of the last three years.
Given the high volume weekly reversal just traded week before last expect, June weakened further into expiration…the last four expiring contracts have done so, confirming the recent trend. Given the premium currently awarded to the July contract last week suggests further extension of the Q2 rally. After a “correction”/end of seasonal weakness, expect an historically consistent seasonal rally. The 10 – years average of those rallies is about 17%
