Yesterday we noted the
intraday reversal, after an extended run, looked to be a short to int.-termexhaustion move. This morning the market has followed through to the downside.
While the secular trendsremain bullish we believe
action is likely the start of the spring/summer malaise
. For a while
in May and go
did not look as if it would ever come, however, yesterday was a reminder that we are notyet out of the weak seasonal period
in fact, we are only just now entering it.While there are no certainties in equity markets, more often than not the spring/summer period usually brings about of profit taking and corrective waves.
As the seasonal charts in the pages that follow illustrate, June tendsto be even more negative than May over the last decade
.How one handles this seasonal period all depends on their individual investment/trading style. Tactical playersmay short stocks and/or lock in profits, whereas long only investors will likely use the weakness to add topositions and/or hedge out downside risk on open positions.The bottom line is the market has come a long way and in short order, thus, a correction is likely and healthy forthe longer-term secular outlook, even if it feels bumpy in the interim.