5/23/2013 Yesterday we noted the market’s intraday reversal, after an extended run, looked to be a short to int.

-term exhaustion move. This morning the market has followed through to the downside. While the secular trends remain bullish we believe yesterday’s action is likely the start of the spring/summer malaise. For a while “Sell in May and go away” did not look as if it would ever come, however, yesterday was a reminder that we are not yet 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 a bout of profit taking and corrective waves. As the seasonal charts in the pages that follow illustrate, June tends to 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 players may short stocks and/or lock in profits, whereas long only investors will likely use the weakness to add to positions 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 for the longer-term secular outlook, even if it feels bumpy in the interim.

S&P 500 Index Monthly % returns (SPX)
June has produced negative returns 7 of the last 9 years.

S&P 500 Index (SPX) Monthly % returns

After a big run up over the last 14 sessions and a 25 % gain from the Nov 16th 2102 lows – the S&P 500 ran into the upper end of channel and is likely to decline as June approaches.

S&P 500 Index (SPX) – May through August Performance last 3 summers
May – Aug. 2010 May – Aug. 2011 May – Aug. 2012

The last 3 summers have all had some sort of swan dive during this period.

NASDAQ Composite (CCMP) - Monthly % returns
June has produced negative returns 6 of the last 9 years.

NASDAQ Composite Index (CCMP) - Daily Chart

The NASDAQ Composite Index had a big reversal yesterday and now looks like it needs to retest the up gap near 3,360 – 3,350 (green shaded bar)

National Average Gasoline Prices - Weekly Chart.
2008 peak

Gas prices have been range bound for some time but are now approaching the upper end of a triangle as summer driving season approaches. An upside breakout would hurt the consumer

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