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Tuesday, April 30, 2013

Selling in May Could be a Bad Strategy This Year

With the major indices inching to new highs, a correction may not occur until mid-summer

At Monday’s close, the Dow Jones Industrial Average was up 106 points to 14,819, the S&P 500 rose 11 points to 1,594, and the Nasdaq was up 28 points to 3,307. Volume on the NYSE was light with just 599 million shares trading. The Nasdaq crossed 383 million shares. On the Big Board, advancers led decliners by 3-to-1, and on the Nasdaq, advancers were ahead by 2-to-1.

Trade of the Day Chart Key
The Nasdaq was almost completely ignored in the press Monday, overshadowed by the success of the more widely followed S&P 500. And yet, the Nasdaq’s new intraday and closing 12-year highs may be more significant for the near-term future of the market than the senior index. Technology and midcap stocks have led every rally since the low of March 2009, but they lagged in April.
The CBOE Volatility Index (VIX), commonly known as the “fear index,” has been relatively complacent since January. In fact, there have been few such extended periods when the index has held below 20.
Conclusion: Jeffrey Saut, of Raymond James, pointed out that Friday was the 82nd session since the industrials have not had as much as a three-day decline. In fact, it hasn’t happened since late in December. He concludes, and I agree, that we are witnessing one of the most powerful bull markets in memory.
With new highs in the S&P 500 just a fraction from Monday’s close, and the Nasdaq breaking out Monday, the data suggests that stocks have again dodged a bullet.
Public skepticism over further advances is very high, analysts continue to push the emerging markets theme though they lag, and U.S. stocks keep hitting new highs — some folks just can’t seem to accept the internal momentum of the U.S. markets. This indicates that selling in May could be a bad strategy. With the major indices inching to new highs, a correction may not occur until mid-summer..
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