Special Bulletin: May 1, 2020 (10am update)

“Sell In May And Go Away” vs. “Don’t Fight The Fed”

Those two market axioms are in great conflict with each other right now. They both have supporting historical evidence as to why the sayings came about. Of the two, not fighting the Fed is generally the more desirable and prudent action to take. The Fed gets its way…ultimately.

However, after a torrid rebound in April, the markets are due for a pause, if not a sharp correction. That expectation may begin to be fulfilled today (Sell in May?), but will likely be met with willing buyers at lower levels in the coming weeks.

An investor doesn’t have to look to far, or too hard, to see that a test of the 50 day moving average is likely at some point in May. The 50 dma’s on all the major indexes are still descending and will likely act as a downward magnet and put the brakes on the rally’s recent advance, at least temporarily.

On a positive note, the more nimble 21 dma’s have already reversed their direction and have even crossed back over the 50 dma’s. This can be seen as a healthy development. If the major indexes do head lower and test the dma’s, the key item to watch will be if buyers step in and support the market there.

Our Current Market Outlook remains “Market in an Uptrend” with a “green” light. Three of our Core Four indicators are green, while 1 remains yellow, creating a net green condition. The stock market is not far from falling back into a yellow condition. But the math of the market is still green.

What may investors consider doing now? Keep your head about you. Tighten stops and take a few profits in extended positions. Continue being diligent when committing new capital. There is no guarantee of an extended bull market. Even though no games are being played, keep your eye on the ball.

Have a Triumphant day! ®