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Tired Market . . . This Can Not Continue Much Longer May 18, 2013

Posted by Tom in Thoughts.
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How’s “Sell In May and Go Away !” working for you?  At a conference last weekend the comment was made “If it didn’t rhyme, then people wouldn’t pay any attention to it !”.  And that’s probably right.  The old saying “The markets are designed to make the most people wrong” is a far better mantra to remember.  In May (so far) the S&P 500 Index has advanced 4.38%; that’s at an annual rate of 129.36%. 

Now if any one out there thinks we’re going to continue up and finish the year anywhere with a +100% gain for the year . . . well, there’s a bridge in Brooklyn I’d like to sell you.  In all seriousness, we can easily see on the chart below the rate of advance is not sustainable.

NASDAQ

I had a hard time drawing a trend line (blue) on this chart because I couldn’t find three points that came close to touching.  What we see here is a steady flow of buyers and few sellers.  There is quite a gap below this market until we get to the 3300 level, but that’s nearly 200 point down.  So it looks like the “Sell in May” crowd has started to panic just a little, but we’re looking for a correction because we’re not going to fall asleep.

This is the time to be careful.  The time to have an exit plan, stops, et al.  Don’t give up those hard-won gains and be tooooo patient.  The charts below echo the story.  The number of stocks in the S&P 1500 Index: Prices are strong and money is flowing in.

Price Strength

Accumulation - Distribution

The top sectors give us an idea where the money is flowing.

Top Sectors

Have a Good Week and remember to watch for signs of cracks in this market.  A correction will come, it may not be deep but it will come quickly.  There is way too much “hot money” that is nervous.

As always, click on any chart to enlarge it for easy viewing.  Charts courtesy of MetaStock and www.HighGrowthStock.com; used with permission.  Feel free to leave comments (this blog is filtered for spam). 

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