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Tuesday, April 30, 2013

Market Thought... Sell in May?

The SP500 is riding high.

And despite a pretty crapy jobs number last month, the market has held up very well. At the moment, the market does not care. But when will it start caring?

Last year, despite a strong Q1 market performance, the "sell in May" rule of thumb rang true because economic data turned south. First it was the US jobs data, causing the Treasuries to collapse, which sparked the correction. Then the EU flared up, again. Even China gave us some crapy data.

Today, the SP500 is up about 8-9% since the beginning of the year.  The 10yr is at depressed levels. (Probably due to the weak jobs data and less then expected GDP.)

And China may have just broken their down trend.

This week will be interesting, as we will get more clarity from the this month's Employment Situation.

Scenario 1:

The jobs data comes inline or weak. Allowing the a treasury yields to that remain depressed. Earnings season passes, and the market has little economic incentive to push upward until data improves or next earnings season.  The market can chill sideways or start a correction.

Scenario 2:

The jobs data kicks ass. Leading to a treasury yield that can bottom, and break its short-term down trend. This could allow money flow into equities, and maintain upside.

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