5-31-2012 Comments

We are at the end of Month, I wonder if the windows are going to be dressed. Yesterday it surely didn't happen.
We continue to wait for a follow through day. I have had no urge to go long in this market as not enough leadership has formed. I note that the S&P500 has retraced 32.8% of the recent drop off of the May 1 high. This structure could be a bear flag and until proven differently that is my read. I have done some historical work on seasonality that I will post in a seperate post. June and July seldom produce a rally that lasts 5 weeks or longer which is CANSLIM bread and butter territory. As Jerry might say, good beach weather this season...

Crude oil prices dropping like they have been is surely some form of world-wide stimulous. Its reason for dropping is probably the US Dollar rally which is not of course because the USA has its act together but only because the USD seems to be the tallest midget at this time.

I have been amazed at the US treasury rally. This must be sucking money out of equities. I show a long weekly chart below with an upper trend line drawn going back to 1986. We are bumping up against a very serious resistance line. I have no experience with bond markets and how they top. A break though resistance could flag the beginning of climactic activity.

I am wondering if the market is acting nervously on the proposed Volcker rule that would prohibit banks from proprietary trading. This rule would remove much liquitity from the market and could let the HFT algorithms run through the market like pirates raiding small ships in remote places.


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