Expiration Week Preview: Sell in May? Not Quite

The Trend: One Way Directional Market

This has been quite a rally, certainly much further and longer than any could have imagined. We're going on our tenth week now. But what's interesting, there is very little to tell us this freight train is slowing down. Oh sure, there will be sell down days... that's expected. Remember, you can have a million reasons to sell but only need one reason to buy. It seems the good news and bad news on the economy are getting bought up. Commodities are perking up which tells us demand is there. I don't like to make predictions, rather I listen to and watch what the market is telling me, then go from there. So, no predictions, but let's look under the hood to get some clues.

Breadth... It Doesn't Need a Refreshing Mint

Breadth is basically the up vs. the down. When we see many up days during a trend, that serves to strengthen the shape and time of such moves. Down markets are generally steep, sharp and quick. The breadth figures are most impressive when you see the MacClellan Summation Index. Here you can see new highs achieved by the indicator. This takes time to turn down of course, and perhaps any drop will be corrective and not the start of a new trend. The breadth also tells us about the participation and leadership. This rally has show widespread leaders among various groups. It's about rotation among sectors so far.

Volume Could Be Better, but Hey - It's May!

The one key indicator I follow is volume. Show me the money? Sorta... SHOW ME THE VOLUME! While I trade names with big volume, I also look for big volume on the indices. However, we're entering a seasonally weak period of volume, so that could produce some volatility. Expiration week is upon us and that should elevate the volume somewhat. However, we're looking for that to dissipate into the summer months.

The Calendar Says It's Time for Action

If the calendar says May, then it's time to go away, right? That's how the usual expression goes. It could be different this time around. A lack of stealth selling, strong leadership, a broad market rally and good trends in place may auger well for a continuation move. After all, who's betting on it at this late stage?