Posted May 31, 2013 14:44
The month of May was a good one for stocks as the major averages rallied more than 2%. The notion of ‘Sell in May’ didn’t occur this month, as traders continued to buy stocks whenever an opportunity presented itself. The most important aspect of the month was the Fed minutes, in which the Fed indicated that there is a chance they may start to taper their QE bond-buying program. That led to choppy markets for the remaining two weeks of May.
This past Friday, the market sold off over 1.5%, of which 1% of the losses occurred in the final hour. This can be credited to index rebalancing, a lot of sell orders as traders looked to taking off position before June, and also the occurrence of one of the most bearish indicators, which is the Hindenburg indicator. Whenever the Hindenburg indicator has occurred, a correction occurred over the coming months. On top of that, the scariest thing is that this indicator predicted the 2008 market crash. Going into the month of June, I wouldn’t be surprised to see a correction, because Fed fears are going to persist. Unless the Fed reassures us at the next FOMC meeting, there is no doubt that these fears will persist.