There was a time, long gone, when investors could diversify their risk by owning several asset classes, like stocks, bonds and commodities. They could rest assured that if one asset class went down it would be compensated by other asset classes. This strategy worked well for decades mostly because the players and investors into these different asset classes were different groups of people whose risk appetite was driven by different factors.

But that has changed over the past few years and in my opinion this is a permanent change. The main reason for this is the massive money printing which has created a mountain of cash chasing very few investment opportunities. A lot of this mountain of cash sits with the large institutional investors like pension funds, sovereign funds, banks and extremely high net worth individuals. These investors have access to every single asset class, geographical markets and the entire

Traders and the media have assumed a path-breaking turn in the ways and mores of the stock market: shareholders are going to rise up and be heard! Some have gone so far as to term this the Shareholder Spring, a reference to last year's Arab Spring, which upended old and deplorable regimes.

From Goldman Sachs (GS) to Pfizer (PFE) to Alcoa (AA), they must be shaking in their shoes, right?

Well, not exactly. In fact, they are all probably having a pretty relaxed Memorial Day. This week will see Wal-Mart's (WMT) shareholder meeting. It's their 50th anniversary and the meeting was expected to be light and airy, all celebratory and little cause for concern, until the recent Mexico bribery scandal. Now: management is expected to face hellfire and damnation from shareholders.

But hold the hyperbole. When Wal-Mart emerges from this anticipated shareholder revolt whole, the entire concept of this Shareholder

While it has already been a difficult quarter for the stock market, the greatest challenges may lie ahead in the month of June.

After reaching a post crisis peak at the beginning of April, the stock market has been in a steady slide since. By last Friday, stocks as measured by the S&P 500 had fallen from its recent peak by more than -9%. And through the end of this past week, stocks were still down well over -7%.

(click to enlarge)

The recent bounce in stocks over the last week was promising. In particular, the market's resilience to overcome sizeable intraday declines on Wednesday and Thursday to end each day higher was impressive.

Whether stocks will be able to continue this recent move to the upside into the summer will be largely determined by a handful of key events upcoming in June. And the excitement gets underway starting next

Imagine there were only two restaurants in your town: one that would sell you a pizza for $100 and the other would sell you a burger for $50. What would you do? Probably stay at home and make yourself a ham sandwich. Similarly, if stocks are priced in to lose 25% of their value, the fact that bonds are 50% overvalued is hardly a compelling reason to buy stocks. Investors would be better off to stay at home and have another ham sandwich.

For those people who believe that dividend stocks are an alternative income investment to bonds, let's take a look at the numbers:

Not a very encouraging argument for stocks, as both asset classes would have to suffer serious declines in price to reach their historical average yields.

However,

It's no secret investor confidence has been plagued by worries galore in recent years. In years gone by, an upward-trending stock market alone might have been enough to convince the retail investor to flood money into the market. But in the post-"Flash Crash" world of investing, things have changed. Since the May 6, 2010 crash, a day in which the S&P 500 (SPY) and Dow Jones Industrial Average (DIA) were down 8.59% and 9.19% respectively at their lows, there is one thing the investing community has been able to rely on: whether the market is up or whether the market is down, the retail investor is selling stocks.

How bad has it been? Since May 2010, there have only been three months in which domestic equity mutual funds have had inflows (January, February, and April of 2011). At the moment, it appears May 2012 will become the 22nd of the

Blame Europe

The return of highly correlated markets should be blamed on Europe. Why not? Everything else is being blamed on them.

Fears of Grexit were reborn just ahead of the typical summer swoon. And, for good measure JPMorgan's (JPM) disaster derivatives bet provided just the excuse everyone wanted to risk-off following Q1's risk on stampede.

The following table shows the most positively correlated ETFs to the SPY this year.

• Dow Jones Industrial Average down 74.92 (-0.60%) to 12,454.83
• S&P 500down 2.86 (-0.22%) to 1,317.82
• Nasdaq Composite Index down 1.85 (-0.07%) to 2,837.53

GLOBAL SENTIMENT

• Hang Seng Index up 0.25%
• Shanghai China Composite Index down 0.74%
• FTSE 100 down 0.01%

U.S. stocks turned solidly lower this afternoon, snapping a four-day winning streak for the S&P 500. Equities were little changed for much of the session before grinding lower over the final two hours. Surprise strength in consumer sentiment kept stocks bobbing back above water earlier in the day but worries about events in Europe eroded optimism and gradually wore down prices. Eight of the 10 industry sectors in the S&P 500 finished in the red with utility and telecom stocks the lone sectors to finish higher. Commodities also ended moderately higher.

Equities ticked higher earlier after a gauge of consumer attitudes climbed to its best level in over four years.

All eyes are fixated on Europe right now, and the market swings with each headline that comes across the wires. Uncertainty abounds as investors try to determine the credibility of these headlines, and try to predict the outcome for Greece ... and then Spain, and then Portugal, and then Italy.

Whether Greece will soon be shown the door out of the euro is up in the air, and what the fallout of that would be for the rest of Europe seems about as clear as mud. One thing that is for sure is, it would be devastating for Greece. But, on a global basis, Greece is immaterial in terms of GDP, so its exit alone is not catastrophic by any means. Of course, the main concern is that once Greece is out of the cross hairs, all eyes would turn toward Spain and Portugal, with Italy on deck. This could

As the U.S. trade-weighted dollar (UUP) breaks out from a four month consolidation pattern, the euro (FXE) is falling below major support. The movements of these currencies have important implications for the rest of the market.

The dollar has been stuck trading roughly between 79 and 82 since January. There is strong chart resistance at these levels both from recent times and two decades ago. In the last couple of years, the dollar made a double top at just under 82 in late 2010 and early 2011. In the late 1980s and early 1990s the dollar made a triple bottom at three different points in this year's trading range. The dollar finally broke above 82 on May 23rd. While there is minor resistance just under 84, major resistance is from 88 to 89 - the highs during the Credit Crisis in late 2008 and early 2009 and in mid-2010 during

I wanted to update two posts that I have previously written and add a few other thoughts that seem relevant at the present time.

Update 1

I posted an article about the timing of any moves up in U.S. and U.K. bond yields and wanted to update the original post, which can be read here.

The U.K.

I suggested a timescale of the fall of 2012 for yields to start rising in the U.K.. I still think that this is going to be somewhere near correct. There are however two changes to that article's hypothesis. These are:

1. I suggested that the poor growth figures would start to become evident in the summer of 2012. It is clear that the U.K. is in recession now. Today, growth for the first quarter 2012 was revised down to -0.3%. There have been a myriad of poor figures out of the U.K. in

The ECB Knows What to do, But When Will They do it?

The U.S. stock markets made a stand at the critical support zone between 1,280 and 1,300, finishing at 1,320.58 up 2% on the week for the S&P500 Index. The pattern of notably weak closes every day, which was very disturbing, was reversed as we saw markets rally in the final hour the past four days.

This is meaningful for two reasons:

1) Buyers are comfortable adding to positions in the 1,280 - 1,300 support area.

2) There is more confidence that the ECB and European Prime Ministers will take the necessary steps to prop up weak central and commercial banks, to help alleviate concerns over sovereign debt and sagging economic statistics.

What to Look for Now

After a series of high level conferences between G-8 leaders, NATO and the European heads of state, there are a generally agreed

Resistance is, unfortunately, not futile for our indices.

On Monday we discussed our expectations for a 2% weak bounce for the week, which would be a 20% retrace of the 10% drop I had predicted we'd have way back (and a bit early) in March. That constitutes a WEAK bounce and not a rally and they almost fooled us on Monday by taking back most of that 2% on day one but, since then - it has been pathetic and we've essentially done nothing the rest of the week.

The levels we were looking for were laid out in Monday's Member Chat and in Tuesday morning's post and were:

• Dow - 12,750 (12,540 is 20% retrace/weak bounce), now 12,529 - off by 11
• S&P - 1,343 (1,319), now 1,320 - off by 1
• Nas - 2,900 (2,840) , now 2,839 - off by 1
• NYSE - 7,720 (7,560), now 7,552

The recent sell-off in the market, with nervous investors made all the more so because of the media's obsession with financial issues in Europe, is renewing talk about bear markets and recessions as people head for cover. In the midst of their misguided fears of a contagion effect, there is also concern about the "fiscal cliff," spending cuts and higher tax rates that, at this point, will take effect on January 1 (funny how that sounds like it would be a good idea for our debt problem).

Looking at recent events through an economic lens makes things much clearer to see and understand. The recent deviation between economic data and market performance -- whereby the economy slowed and even contracted, but the market appreciated -- was highly unusual. The explanation (read: excuse) is most likely the mildness of the contraction compared to the severity of the 2008 economic disaster combined

The technology sector remained bearish throughout the day yesterday. At the close of the market, the tech sector was down 0.97% for the day. It was the worst-performing sector and dragged the Nasdaq back into negative growth. Most of the larger companies, such as Microsoft (MSFT) and Apple (AAPL), were largely unchanged; however, some of the smaller companies suffered large blows to their share prices. NetApp (NTAP) fell by 12.29% off of poor Q4 financial data, while OmniVision Technologies (OVTI) fell more than 8%.

Top Gainers

• MGT Capital Investments (MGT) up 26.60%
• Vringo (VRNG) up 24.63%, but down 4.13% after hours
• Pandora Media (P) up 12.29%
• Asia Pacific Wire & Cable (APWC) up 11.38%
• Optical Cable Corporation (OCC) up 9.67%

Top Losers

• LDK Solar Co. (LDK) down 15.08%, but up 4.25% after hours
• NetApp down 12.29%
• JinkoSolar Holding Co. (JKS) down 8.35%, but up 5.00% after hours
• OmniVision Technologies down

Today we get the Michigan Sentiment Final, which could give us a boost, but nothing dramatic. Markets around the world are mostly higher this morning and U.S. futures are higher as well. It will be interesting to see if U.S. markets can remain positive going into the close ahead of the weekend or if we get weaker as people want to get out of the market in case Europe implodes again over the weekend. We fear that the sell-off is almost a certainty as stories continue to emerge of suicides as a result of these austerity measures in the southern European states, and it is only a matter of time before the rallies and protests resume.

Looking at Asian markets we see markets are mixed:

All Ordinaries - down 0.61%

Shanghai Composite - down 0.74%

Nikkei 225 - up 0.20%

NZSE 50 - down 0.28%

Seoul Composite - up 0.53%

Top Stories
Tim Cook forgoes $75M. While some top executives have taken huge payments despite failing on a grand scale, Apple (AAPL) CEO Tim Cook is giving up $75M by excluding himself from a program that enables staff to accumulate dividends on their restricted stock units that are still vesting. Cook has 1.125M such units that are due to vest over the next 10 years. Opinion: Protected covered call for Apple.

Dell eyes Quest Software. Dell (DELL) is in talks to buy Quest Software (QSFT), Bloomberg reports, as the PC maker continues its strategy of shifting its focus to higher-end business customers, a task made more acute by its weak PC sales in FQ1. In March, Quest agreed to sell itself to P-E firm Insight for $2B although it then received other offers during a "go-shop" period. Opinion: The real problem with Dell's earnings miss.

Japanese core inflation inches up.

It is said that bad things come in threes. A case where this is explicitly true is when it comes to secular bear markets for stocks. History has shown that when stocks enter such periods of prolonged decline that three major corrections occur before a new secular bull market begins. And to date in the current secular bear market that began in 2000, we have only experienced two sharp declines. Thus, history suggests that one more major stock market correction still lies ahead before we reach the dawn of a new sustained rise in stocks.

Dating back to the Buttonwood Agreement in 1792, U.S. stocks have experienced prolonged secular bull markets periods of steady gains followed by similarly extensive secular bear market phases of choppy declines. These bear phases occur to cleanse the excesses that were built up in the market system from the prior bull cycle and have historically

The E-Mini S&P 500 seems to brush off the pending Greek exit and banking scares coming out of the Euro Zone for the brighter modest US recovery scene. US Initial Jobless Claims dropped 2,000 this week to 370,000 staying within the same monthly range. The last US Unemployment report was at 115,000 new jobs created way under the previous average of 270,000 about three months prior. The Unemployment rate remains steady at 8.1%.

New orders for Advanced Durable Goods increased 0.2% while on the previous March reading, it decreased by 3.7%. This report covers everything from home appliances to large aircraft. Markit, a global survey company reports the US manufacturing Purchasing Managers Index decreased to 53.9 from 56.0 in April. Of course, anything over 50, points to expansion.

In the banking sectors, profits have increased 22.9% from last year, but lending is down. The Federal Deposit Insurance Corp., on a