Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors. Performance For May 2014

How does one put a positive spin on a disappointing month? Well, if you bought and held, you had a good month! I guess that is something!

Our Strategies had a tough month. Why?

Once again Central Bankers propped up markets with the mere mention of Quantitative Easing (QE) and lower interest rates. The biggest culprit this month, the European Central Bank (ECB) which meets in June and will likely lower interest rates and begin its own QE program.

Like drug addicted teens, the markets soaked up the news of this possible easing and drove markets higher. Surprisingly though in looking at the numbers, the foreign markets trailed the U.S. in the month of May.

So why is this?

I believe for one that it may be too late in reality to move European growth higher despite this possible last ditch effort by the ECB and the markets know it. Just look at this anemic growth in manufacturing in Europe. According the Business Insider, "While some countries are doing well (EG Spain), the big powerhouses like Germany and France aren't so great. German manufacturing has slowed to a 7-month low. Meanwhile, France is at a 4-month low, and it remains in contraction."

The following chart from Markit says it all (declining manufacturing growth in most European countries):

Secondly, I believe U.S. markets outperformed for one simple reason. Our growth has slowed and this same group of drug addicted teens (the traders) bid up overextended stocks in hopes that the Fed might once again add QE to our economy.

First quarter GDP growth in the U.S. was revised down to -1% from a previous estimate of 0.1% just last week. One would expect a sell off on such news, but instead stocks rallied. You tell me how this makes sense unless market participants are hoping to see the Fed curtail its measured reduction in QE or even begin a new QE program?

The sad truth is developed countries including the U.S., Europe and Japan are in a race to debase their currencies. U.S. dollar strength in recent weeks can be blamed solely on the job Japan and Europe have done in debasing theirs faster than we can debase ours.

As one market commentator I occasionally follows likes to say, "how can rates be going down and the Fed supposedly is reducing QE? There is just now way folks this is happening."

Quite frankly, he is probably right. We have already seen evidence that the Fed is manufacturing buyers for treasuries in collusion with the other Central Banks of the world. See former Assistant Secretary to the Treasury, Paul Craig Roberts, article "The Fed is the Great Deceiver" for proof on this front.

I have said it before and I will say it again "this my friends is all going to end very badly!" Performance

I mentioned, above, that had a tough month. Technically, here is what is happening.

Besides just general confusion among market participants about the direction of the U.S. and global economy, which is creating significant intra and inter-day volatility. Many trend followers, like, employ a multi-signal process for many market indexes. Our signals works both off price movements and the force of those movements. They must both confirm a signal change.

Last month, most of the gains were on very low volume. Lower volume versus prior months and prior years. In other words there was not much conviction in the moves.

So despite us getting buy triggers on the pure price signals, we did not get confirmation from the secondary signals, which remained weak. In English, prices moved higher, but there was not enough volume/market participation to trigger our secondary signals.

It was killing me all month to sit and see prices move up, but my hands tied from participating.

See our performance below:

The good news, if there is any, is that the market fundamentals are starting to fall apart. I believe we could be witnessing a top (or at least a significant correction) in the making here. I make the bulk of my call based on the way markets are trading and the fact that despite elevated risk, the Volatility Indexes continue to falling.

Courtesy of RMG Wealth Management

This chart shows a lack of fear by market participants and even more scary a return of volatility to levels not seen since the top of the bull market in 2007.

Also the number of bulls vs. bears in the recent American Association of Individual Investors (AAII) survey shows an excess of bullish sentiment. Historically this has meant a correction at least is forthcoming.

I even read recently that some trend followers are modifying how they manage money to stay in the game. When you see managers changing the way they manage money, this is a dead giveaway the end is near!

So why would this correction (or maybe a bear market) be beneficial? One, if you are following our signals you are likely hedged using our sample portfolios. Two, we are already prepared and could easily shift to net short as our models confirmed a down move. Three, every dog has its day and we are overdue to have one!

Our Market Forecast

Our forecast at this point remains unchanged from prior months. I really do see the possibility of a pretty good correction over the summer that may turn into a Bear Market. If not, I would expect a larger correction since we have not had a significant one since the summer of 2011.

So hold onto your hats and don't buy the mantra that "as long as the Fed is behind us how can harm us." I believe this time it may be different!