ICouldBeWrong

Money Flows Into the Market: What They're Telling Us

My concern is that we are going to see a classic sell in May and go away scenario.

Here's how I think it might play out. Crude and natural gas make one last surge upwards, crude tops at around US$130 sometime in early May. Then we see selling across the board in commodities, and also in commodity stocks. This pulls down the major US averages which have been trading sideways, and they join the shanghai composite and nikkei, trending down. S&P can't close above 1400 for more than a few days.

At the same time the Yen begins to gain strengthen. The Yen has been weakening recently and has almost pulled back to support (~50dma) levels. Once it reaches support it will resume the bull wave up that began back in mid 2007 when equities were topping. A pattern emerges of days where the Yen (and maybe Renminbi) strengthen and commodities and equities sell off. The Dow Jones transports having formed a clear heads and shoulders top break 200dma support and enter free fall. The Yen bull market becomes the dominate theme as all eyes turn again to the Yen and the unwinding of the carry trade.

I'm still trying to work out bonds.

Ultimately crude (WTIC) reaches a nadir between USD80-90 and a bottom in equities/commodities forms.

OTOH if the S&P closes above 1400 for a couple of days within the next few weeks I'm on wrong and I'll cover my shorts.