May Special Edition Report
ByOverall the market has had a good run since the March 9th closing low of 677 for the S&P 500. I have been silently praying that we at least make it back to the October 27th level of 849. Over the last few weeks we have been consolidating slightly above and below this level. At the time of writing this document the S&P 500 sits at 878.
If the market breaks down during the summer months, a key support level to watch is the November 20 closing low of 752 as this support line is close to the long-term support in October of 2002. A breakdown at this point will indicate significant weakness in the market and market will try to consolidate between 752 and 677, the March 9th closing low.
The March 9th closing low is very significant. Most investors and analysts are expecting this to be the bear market low. If this level is breached on significant volume, expect the market to do poorly over the short-term and higher volatility to return to the market as it is possible that some investors may start to panic.
At the current time there are signs that the market has some legs as we have just finished an incredible April, up 9.4%. In addition the VIX has been declining and technology stocks have been outperforming, which is positive for the market in the short-term.
These positive indicators may give investors some room to reduce equities, but they do not ensure that the rally will last forever. Investors should be using this opportunity to readjust portfolios, take profits (or decreasing equity positions) and prepare to rotate into sectors that are expected to outperform in the summer months.
