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Market Preview: Skipping the Summer Swoon

Tickers in this article: OPEN WFM V SPY ^DJI ^GSPC ^IXIC MA

NEW YORK ( TheStreet) -- One thing that 2012 has going for it that 2011 and 2010 didn't is that the American people are going to the polls to vote on who calls the White House home for the next four years.

"On average, the April-May period for the Presidential election year is the weakest two-month period for the year -- down nearly 2.0%," Bank of America Merrill Lynch said Tuesday. "This is followed by the strongest three-month period in June-August -- up 5.0% -- that often moves the market to a new recovery in autumn."

By that logic, the firm thinks the market could avoid a summer swoon so it may make sense to pursue a "buy the dips" strategy this month. It's sticking to the view that bigger is going to be better later in the year.

"We maintain that leadership is emerging in the mega caps," B of A said. "We particularly favor those stocks with strong technicals that are also under-owned by institutional investors ... Stocks that are favored are: Caterpillar(CAT) , Chevron(CVX) , Intel(INTC) , Eli Lilly (LLY) , Procter & Gamble (PG) , Kimberly-Clark(KMB) , Coca-Cola(KO) , United Parcel Service (UPS) , DuPont(DD) , and Verizon(VZ) ."

Tuesday's upbeat session aside , investors are still wary of what happens next for stocks after being burned the past two years. The economic data has shown some cracks of late with first-quarter GDP coming in a bit short, and a disappointing April jobs report on Friday would be difficult to explain away as a blip after the softness seen in March.

There's also the continuing question of whether the Federal Reserve is going to placate Wall Street's appetite for more quantitative easing when Operation Twist runs out at the end of June. One potential warning sign for the bulls though may be that the financials are no longer showing the same leadership that they did in the beginning of the year. B of A said Tuesday it believes the group is still stuck in a secular bear market that began in 2008 and that "the sector likely has five to seven more years of being range-bound." Yikes.

As for Wednesday's scheduled news, it's another big earnings day with credit card giants MasterCard(MA) and Visa(V) -- both market leaders this year, up more than 20% each -- opening their books.

Whole Foods Markets (WFM) gets the spotlight treatment here. The Austin, Texas-based operator of natural and organic food supermarkets is slated to report its fiscal second-quarter results after the closing bell, and the average estimate of analysts polled by Thomson Reuters is for a profit of 59 cents a share in the March-ended period on revenue of $2.67 billion.

The stock is up nearly 20% so far in 2012, but it's pulled back a bit since hitting a 52-week high of $86.35 on March 16. In early February, Whole Foods beat Wall Street's earnings estimate for its first-quarter results by 8% and lifted its profit outlook for the full year to $2.28 to $2.32 a share from a previous projection of $2.21 to $2.26 a share. At that time, the company said same-store sales to date for the second quarter were up 9.4% with total sales on pace to grow 13.3% year-over-year.