Sell in May and Go Away? ~ The Risk Averse Alert

Monday, April 06, 2009

Sell in May and Go Away?

And the present similarity to trading during the mid-December '08 period marches on...

Or does it?

Part of the reason there appears similarity is seen viewing both the NYSE and NASDAQ McClellan Oscillators.

Yet look at the Summation Index for both. Each is in better position now than was the case in December '08. This is an indication of building underlying strength whose evidence likewise has been revealed via technical divergences galore since October '08.


Building strength also is evidenced by the present position of both RSI and MACD. Both are registering on the buy-side of their respective ranges. This was not the case in December '08. Subtle as this distinction may seem, better not ignore it.

Same colored dots you see drawn above are an attempt to view in reverse the market's relative position in the course of its ongoing advance.

We could be at the red dot, in which case the market is about to shoot still higher. Or we might yet see a dip to the blue dot, at which point the market then would be poised to continue its advance off March bottom. Up to now the latter possibility has been my focus. Better not ignore the former, though.

SPX weekly

And now my fear. You know the drill: it's like-from-like. So is the present period like December 2000 through January 2001? RSI similarity drives this analysis.

Anticipated price form unfolding in the present period might likely differ to some degree from earlier this decade. Yet let's not ignore the facts plainly revealed here.

As was the case earlier this decade the S&P 500 is in a downtrend and trading below its 200-day moving average. Yet now the index's decline is far more accelerated. Weakness now is much more pronounced. Better not ignore this either.

So the question here is whether the market's bounce off March bottom might not be long for this world. Could we be looking at a classic "sell in May and go away" situation forming?

I am beginning to fear this might be the case.

Fast Money
* * * * *

© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

There's an easy way to boost your investment discipline...

Get Real-Time Trade Notification!