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Mid-Week Market View – May Selling?

As I sit here early Wednesday morning looking at yesterday's market action and the early trading in European markets, I notice the lack of energy in the tape.  Since putting in a recent bottom last Thurday, the S&P500 jumped higher and last night closed only 13 points off the year to date highs.  

Earnings season is almost over and May is well on it's way, so it makes sense people are a little less furious in their trading.  After this week the month of May only has two more full weeks of trading, and then June and the summer feelings will have arrived.  In other words, if the sell in May and go away mantra works this year, the selling could arrive at just about any point now.  

As we usually do, looking at the market in multiple time-frames helps gain perspective and insight.  Particularly the intraday action so far this week has been nothing short of boring.  To be fair however, the market has stayed constructive overall as the bounce in major indices so far this week looks healthy.  

Warning signs become somewhat more alarming however when looking at specific sector action.  The energy sector for example has traded fairly weak over the past week or so and on the chart is forming a bearish head and shoulders pattern  Non-cyclical stocks in general are outperforming cyclicals, which is what has kept the rally alive for the most part as of late.  Neither of these signs are bullish.

Our porfolios this week haven's seen much change in value nor components so far this week.  After closing our long silver posiiion (we entered late last week for a bounce), we also added a new position in YHOO and added to our Visa (NYSE:V) long.  We also took initial profits in MGM.  

Intraday trading has been a loser so far this week as we got stopped out of a gap fade yesterday.  The low volume but consistent ticking higher yesterday kept the gap from filling.  Such is trading however, and losses are to be taken as part of the game rather than a personal insult.

Have a great rest of the week.

Serge

Visa Chart:

After initiating our first part of a long position in Visa, the stock has now moved up into a zone of resistance between $80-$82.  If it clears this it has room up to $88 and above.  We are still holding this position as part of a bucket 2 trade but might soon move it into a bucket 3 holding.