Remember the universal maritime distress signal?  Remember as Boy Scouts we could earn a merit badge by learning the morse code and click out messages on a telegraph key?  .. -- or was it -- .. for mayday?  I forget, but now we have the Plunge Protection Team & Homeland Security for emergencies.  A group of government professionals that will rush to the aid of all or most investors at the drop of a decimal point.  The reason I am relating all of this is the old adage about sell in may and go away.  Studies have shown that the stock markets will slow down much more often than speed up in the summer months and I believe that we are coming up on a period of a few months when some additional caution is well advised in investments.  However, just as the telegraph improved communications over polished mirrors, the Plunge Protection team has taken much of the short term risk out of the markets.

Having said that, I would also like to say that most of the major domestic stock indexs have recently moved down again from their respective established resistance levels.  The charts are telling me that there is no way for the stock market to move higher until it has dropped back and regrouped.  Testing recent lows again should be expected over the next 1 to 5 months.  That would mean roughly a 10% correction in the major stock index's.    

Commodities are not quite as clear.  The CRB index formed a double top in march and april at the 420 level.  A 10% correction would take the CRB to an established support level at about 380.  But the CRB is heavily weighted in oil and gas.  Both of these are trending up in a vigorous fashion, with oil setting a new high this week and Nat Gas setting a recent high.  Precious metals are confusing with gold dropping thru support today and seems to be heading to $800 per ounce, while Silver held above support and seems to want to move higher.  The USD which usually runs the inverse of precious metals has been stable with a 2 point trading range now established.  Is the stability of the USD taking some of the trading fluff off the commodities market???  Got me.  Someone has to draw a picture for me to understand anything.

I almost forgot about interest rates.  The five and ten year treasuries have also established some trading ranges recently with the swing of the 5 yr rate being about 100 basis points and the 10 yr range being about 60 basis points.  Both of them are near the top of their respective ranges, so I expect 5 to 10 year rates to come down for a while.  Since many bond rates and mortgage rates key off the 10 yr treasurey, we could see some increased borrowing activity in some sectors because of dropping rates.   

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