If You Sell In May, Be Prepared To Buy Back What You Sell

It seems the action seen this past week has bears scratching their collective heads once again. With many viewing the market as certainly “topping” back in March, the market has doused cold water on those expectations, as I had been strongly warning would likely happen.

Since holding the support we noted several weeks ago at 2330SXPX, the market has seen quite a powerful move back up to the target we set between 2380 and 2410SPX. And, most of the rally was seen on the back of short covering of those who jumped the gun on the bearish side of the market.

I know many of you look to various data such as P/E ratios, GDP, employment, interest rates, CPI, etc., in order to glean market direction. And, you are likely quite confounded by the market action as it clearly makes no sense to you based upon the data you follow. So, maybe you are following the wrong data? Maybe that data is really meaningless to the market?

Yes, yes, I know. “Avi, you are talking nonsense.” But, am I really? If none of the data can explain why the market has done what it has done, what does that tell you?

Oh, I am sorry. I forgot. It’s really the central banks that have pushed us up this high. Then, for those of you that are certain of the central bank’s being that powerful, I am quite sure you are heavily long in your investment accounts.

But, what was that? You say you are not? But, why not? If you are so confident in the perspective that central banks are pushing this market higher, then why would you not be going along for the “certain” ride higher? Would that not be the most prudent thing to do to put your money alongside the central banks who are “certainly” driving the market up?

You know why you are not long? Because to the core of your being you really do not believe in the omnipotence of the central bank. And, you would be right. In the back of your minds, you question that if central banks were really so powerful, how could we have ever experienced the 2008-2009 crash? How could we have ever experienced the stock market crash which led to the Great Depression?