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T/A 5/1/08 MAY DAY, MAY DAY!!! uncleharley  04-30-2008, 8:22 PM | Post #2513415 |  109 Replies
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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.   

uh   
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Re: T/A 5/1/08 MAY DAY, MAY DAY!!! norbertc 05-01-2008, 3:03 AM | Post #2513457
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These two short FT videos on the Fed and on EMs aren't bad watching.  HERE. The global valuations trends are interesting - though a worry for S&P investors.

What a move in Latin America yesterday!
 
10% Correction Lower? bythenbrs 05-01-2008, 3:17 AM | Post #2513459
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If a re-test of previous lows is likely, an aggressive trader would be looking to short the SPY at this point in time?

Re: 10% Correction Lower? kerryvan 05-01-2008, 5:28 AM | Post #2513470
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basically it says emerging market boom should continue for some time,  yea!
Re: 10% Correction Lower? uncleharley 05-01-2008, 6:39 AM | Post #2513477
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bythenbrs:

If a re-test of previous lows is likely, an aggressive trader would be looking to short the SPY at this point in time?

My feeling is that the Plunge Protection Team will make the correction very gradual and difficult to short.  Inverse funds have lost more money for me than they have made, so I rarely use them anymore.  Perhaps someone else has had a more productive experiance that they can post on the subject.

uh  
Halloween indicator with some modifications kunag 05-01-2008, 7:23 AM | Post #2513489
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Hi UH

The TA monthly starting post is very good as usual.Thank you very much.

You touched upon the topic of selling in May and going away, The Halloween indicator.

Some more pointers regarding the indicator,
http://www.marketwatch.com/news/story/market-timers-attempt-improve-halloween/story
./market-timers-attempt-improve-halloween/story.aspx?guid=%7B7923307E%2D00C4%2D4779%2DAC6C%2D11F8805C99FC%7D&dist=msr_8 
Intermarket Technical Analysis DeerIslander 05-01-2008, 8:48 AM | Post #2513523
2  

An excellent article on the FIDO site by John Murphy a highly respected T/A expert discusses how using the T/A analysis of one market can predict trends in other asset markets. FIDO

These are the main intermarket relationships that have characterized the financial markets over the last thirty years according to Murphy:

"The dollar trends in the opposite direction of commodity prices;
Commodity prices trend in the opposite direction of bond prices;
Bond prices normally trend in the same direction as stock prices;
Bond prices, however, usually change direction before stocks;
During a deflation, bonds and stocks decouple-bonds rise while stocks fall;
A falling dollar becomes bearish for bonds when it pushes commodities higher;
A falling dollar becomes bearish for stocks when it pushes interest rates higher;
Rising commodity prices boost stock sectors tied to those commodities;
Rising commodity prices are good for emerging markets; and
Trends in commodities, interest rates, and stocks are global in scope."

Re: Halloween indicator with some modifications Santa Cruz 05-01-2008, 9:13 AM | Post #2513536
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Re: T/A 5/1/08 MAY DAY, MAY DAY!!! uncleharley 05-01-2008, 9:45 AM | Post #2513548
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Another aspect of May Day is that it is the labor day in most of Europe.  Many of the workers in many of the former Soviet Union countries take the entire month of May off.  In Russia there is a migration of middle class people away from their urban jobs to their Dacha's in the country.  This of course makes it very difficult to conduct any business or get much of anything else done.  The long term chart of EUROX [my favorite eastern europe mutual fund] shows that the funds nav begins to drop in april of each year and begins to come back up in june or so after everyone is back from their May Day celebrations.   That may be something to consider when working emerging markets. 

DI,  I am a big fan of Mr Murphy, but somehow I had missed that gem of an article.  I have it printed now and have the list taped to my PC.  Thanks..

uh 
Waiting for Nasdaq to hit 2780 mediafright 05-01-2008, 10:33 AM | Post #2513570
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I stand by my target of 2600 coming either before May options expiration or early June. Next target 2780 in 2-3 months. After this market takes a breather and rides between 2600 to 2800 before breaking higher in last quarter.

 
Re: T/A 5/1/08 MAY DAY, MAY DAY!!! DeerIslander 05-01-2008, 11:03 AM | Post #2513578
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uncleharley:

DI,  I am a big fan of Mr Murphy, but somehow I had missed that gem of an article.  I have it printed now and have the list taped to my PC.  Thanks..

uh 

UH -- I have it there too. They are very good basic reminders.

Interesting observation on EUROX.  Nice starting thread BTW.

The US$ is pretty strong today and energy and miners are getting hit a bit. So far I have not traded this week
Shorting the SPY bythenbrs 05-01-2008, 4:25 PM | Post #2513701
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Any thought of shorting the SPY or any other stock/fund is now forever out of my system...

Doesn't this model (market) come with turn signals?
Implications of crossing 1406? javajoe 05-01-2008, 6:49 PM | Post #2513760
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DI, UH, and Norbert -

For us newbie T/A guys, what are the implications of crossing past 1406?

 Just trying to learn,
-JavaJoe