Monday, May 22, 2006


For most of the 20th Century, May was one of the worst months for stocks, hence the saying "Sell in May and go away". Toward the end of it, in the long Bull market, May became one of the best months. Once again the tectonic plate of semi-annual, seasonal stock behavior seems to reinforce the May 1 to October 31 period as grossly inferior to its complement.
With extended Bull markets, Intermediate and Long Term, both beginning in Octobers, interest rate hikes and concomitant housing slowdowns, oil and other commodity prices reaching records, it was no surprise that the top had to be put in.
Although with Friday's option expiry, usually a volatile time, we did seem to put in a surcease of downside action at various 200-MAs, horizontal and other support levels, we may stil not be through wringing out the excesses that liquidity has produced.
Temporary positive signs include a higher public/NYSE Specialist ratio, a VIX of 17 (20 as of Monday) reminiscent of and exceeding last October's high, and a recent record reading of the CBOE put/call ratio of 71.
Even though the newsletter surveys do not encompass the entire week, the AAII was giving a rare inverted reading with Bears at 43.6 besting the Bulls at 39.4%.The McClellan Oscillator, ratio-adjusted, plunged through the -50 line, a usual support area recently, ending the week right on it, after descending almost to -75; the Summation Index broke down through the zero line, usually a negative sign, but has not begun to mount a cruise-ship turnaround yet. And the SharpChart's Bullish Per Cent of S&P 500 Pt.& Fig. chart is at 56, not near a bottom - after having given a prescient 3-box, 6% Sell signal days ago.
Enigmatically, the Rydex Nova/Ursa investors have their eyes on a different ball, throwing more money into the funds with a low, Bullish ratio of 11. Overall, AMG reports the first Outflows of Equities in many months, after the first quarter totalling over 1/2 of the 2005 Inflows. With commodities also in the dumpster, only the Dollar and Bonds seem to be temporarily oversold and rising.

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