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The Investor's May 2012 Stock Market Dilemma: "Sell In May And Go Away" Or "Don't Fight The Fed?"

Some Analysts are asking why the Federal Reserve choose to talk up the economy this past week, and subsequently the markets, at such a critical technical price level time and juncture, this past week, the end of April?

They are wondering if the Fed-projected good news is as reliable as some analysts might hope.

Other more Fed-confident analysts are also electing to remind us that, regardless of present concerns of market price levels perhaps showing fatigue recently, we might want to remember that old Wall Street Mantra:"Don't Fight the Fed!"

Yet, along with the age-old mantra, and coming into particularly timely relevance next week, is another old and often reliable Wall Street Mantra: "Sell in May and Go Away!"

A key question for investors this year is, which of these mantra's will win out this 2012 market year? And analysts want to have been found on the right side of the answer, especially going forward this Presidential Election year?

I believe Federal Reserve's current loose monetary policy makes it undesirous of seeing any a precipitous conclusion to current upward price momentum in equities and subsequently generated wealth effect.

The present historical weights of the Presidential Cycle and Annual Cycle, going forward into this coming week and month of May, 2012, counter the Fed's objectives. So talking up the market this last week, at this key and critical technical juncture and composite market price level ensued.

However, the question remains. Will talk be sufficient to prevent the powerful market forces of these price cycles and echovectors from fulfilling themselves, especially with all geopolitical, macroeconomics, and domestic employment uncertainties currently being considered by the market?

I believe the market itself will tell us the answer to this question very soon.

However, I also maintain, on a historical price basis, that (in the meantime) wisdom may reside in applying and holding full net portfolio composite price level insurances (hedges and hedging applications) going forward into May this year...

Such a strategy may be particularly timely on a risk-to-reward basis for this next quarter, and beyond...


A Technical Cyclical View:

Below is a Five-Year, Weekly, OHLC, Chart of the DJX, the 1/100TH Index of the Dow Jones 30 Industrial Average.

This chart highlights the key Presidential Cycle echovectors, and 4-year echobackdates in 2008 for the current 2012 market year.

It also includes some key annual echoVectors, and 1-year echobackdates in 2011 for the present 2012 market year (currently in force as a result of 'follow through' to key 2010 echovectors and 1-year echobackdates to the 2011 market year).

The chart is very time-cycle revealing, and price-support level and price-resistance level revealing, and longer-term price support pivoting-vector revealing.

Highlighted in pink, notice the current Presidential Cycle echovectors and the Presidential Cycle echobackdate period we are currently entering.

Highlighted in aqua-blue In pink, notice the current key annual cycle echovector and Annual cycle echobackdates, and last years springtime upward momentum finish we are currently entering.

Also, highlighted in horizontal solid green, notice the price equivalency basis recovery level we have now achieved on this months Presidential Cycle echovector.

Highlighted in red and green spaced-lines are various key Presidential Cycle echovectors and Presidential cycle echobackdates that came into play in last year's spring and summer price level swoon.

Their co-ordination is quite remarkable, especially regarding various near-term relative strength and relative weakness time-points.

Perhaps this view warrants caution?

Or, perhaps this view opportunes a key breakout?

What do you see?

Which Wall Street mantra is it that you hear?


DJX: 1/100TH of the Dow Jones 30 Industrial Average

5-Year Weekly OHLC

Key Presidential Cycle EchoVectors and EchoBackDates

Key Annual EchoVectors for 2012 and 2011.

Key 1-Year EchoBackDates for 2012 and 2011

(Click on chart and click again to enlarge and zoom)

Disclosure: I am short SPY.