John Overstreet's  Instablog

On Friday, Bespoke Investment Group put up a table showing the thirteen +2% month-ending Fridays for the S&P (SPY) since 1928.

I am interested in the six post-Nixon Shock episodes, which I have put next to corresponding 'buy' signals for the Dow (DIA) using Stephen Leeb's Oil Indicator from his book The Oil Factor:

*May 2010 is based on data from stockcharts.com.

There is nothing momentous here, I think, but it might dampen hope that the rally last Friday signaled an immediate resumption of a bull market. In the case of 2001, which was nearly a year after the Leeb Indicator went positive, stocks continued to slide for a long time.

(click to enlarge)

In 1974, the market rallied in 1975, but this was not really the beginning of a strong bull market. In 1981, the market continued to slide, although not precipitously, well into the summer of 1982. Only in the case of 1987-1988 can we say that a significant rally was on deck.

The rally last week was the only one that did not seem to be associated with a post-Leeb shock. Very "new normal", I suppose.

But there is a much stronger correlation that casts doubt on my warning of a possible jump in oil this summer. In every single instance of these 2%+ jumps, year-on-year WTI oil (USO) did not bottom until months later.

(click to enlarge)

Oil rose 9% on Friday, of course, so we can't say the markets are lacking a sense of irony.

Disclosure: I am long BAC.

Additional disclosure: I am long September WTI.