Go Away in May?

Markets often are listless in the summer and early fall and one of the maxims on Wallstreet and Baystreet is to sell in May.  However, this year so far, markets have not been following “seasonal” trends.  The question is, will we continue to see some of the positive price action we saw in April continue into May and June. 

Like it or not, we as tax payers are now proud owners of a portion of Chrysler Corporation, both in Canada and the United States.  It will be interesting to see which automotive brands remain after the car companies complete their restructuring.  General Motors (GM) is planning on eliminating its Pontiac and Saturn brands.  However, consumer demand for cars remains weak.  People are unlikely to make a major expenditure like a car when jobs and job security remain uncertain.

Yesterday, the markets chopped around much of the day and finally primarily closed down.  Selling pressure remains weak.   While it would be healthy to see the markets rest here for a while, ideally, they will remain largely sideways as opposed to moving sharply down.

Continuing with the theme of top down investing, according to research by Tradingmarkets.com, the country ETFs, show the best characteristics of reversion to mean, followed by the sector ETFs, and finally the commodity and bond ETFs.  What does this mean?  Well my interpretation is that when an ETF or stock has had a good positive run that extends beyond the normal 5 to 8 days, it will likely revert to mean by pulling back to an area of support such as a key moving average such as the 20 day or 50 day moving average.

  As of this writing, futures are positive and the DAX is positive, indicating a positive open.   The market condition scans are once again showing no strong directional bias but did show strong interest in the institutional and RSI scans suggesting institutional investors are starting to quietly accumulate stock positions and prefer to do so when markets are relatively quiet.  The market bias indicators are continuing to show a slight bias to the downside.

Index	Change	%Change	Level	Phase
TSX	-91.48	-0.97%	9324.83	Recovery
DJIA	-17.61	-0.22%	8168.12	Recovery
Nasdaq	+5.36	+0.31%	1717.30	Recovery
SP 500	-0.83%	-0.10%	872.81	Recovery
Russell 2000	-3.91	-0.80%	487.56	Recovery
NYSE	-2.78	-0.05%	5513.36	Recovery

Source: Telechart

Short Term market outlook:

Bias: Scans showing a neutral bias

Energy: moderate

 Primary Trend: Remains down to sideways

Sector	Phase
Consumer Staples	Recovery
Healthcare	Bearish
Technology	Recovery
Utilities	Bearish
Energy	Recovery
Financials	Recovery
Industrials	Recovery
Materials	Recovery
Consumer Discretionary	Recovery

Source: Telechart