Sell in May and… Maybe Regret It

The old adage of ‘sell in May and go away’ may, in fact, be a bad idea right now.

The simple truth is there’s a lot of momentum in both the markets and the economy. The cocktail of reopening, paired with an unprecedented money dump, have the economy primed.

Prices or rising. Everywhere. But inflation figures, while higher, still seem relatively benign. Heck, even the 10-year treasury yield has declined a bit recently.

The truth is, there is a ton of unknown in this system. And, looking forward, it’s a tough call as to how long this thing keeps going higher before there’s some sort of correcting event. BUT!!!! So far, the correcting event has not presented itself in the technical pattern… at least, not in the very short-term.

In fact, when looking at the day-to-day technical movement — and the behavior of the futures markets — it looks like there is still wind in the ‘sales’ for this market (ha, see what I did there?).

This week it should not be unexpected for the S&P 500 to publish yet another all-time high, with an intra-week target of 4240-4264.

The temptation for many is to simply suggest ‘we’re do’ for a correction, therefore it will happen. And certainly, if that’s your take, it will eventually be right. A broken watch is right twice a day after all. But the technical data suggests the trend is unbroken at this point.

The question is, what breaks the trend? Earnings season continues to surprise to the up-side, and the government continues to suggest more stimulus. My guess: a hint of change from the Fed. Markets get the idea that rates are going higher, we see an increase in volatility. But until then…

Watch for up-side resistance around 4260, with downside support around 4130. The meat of the trend still suggests a print of 4250 in the near future.

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