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Andy’s Market Report 4/15/2012

Spring is here in Vermont, well, almost. The recent two feet that resides outside my window is Old Man Winter’s last attempt at redemption after a poor showing this past winter. The market has essentially rallied for three straight months, but May is upon us and we have all heard the old adage “sell in May and go away’. Here are just a few stats that tend to back-up the phrase spoken frequently among traders and Wall Street over the past few weeks.

May is historically one of the weaker performing months. It is something to consider over the intermediate- term in this already overextended market. I looked at the historical average return of the S&P on a monthly basis over the last 60 years to see if actually backed up typical range-bound summer months also known as the “summer doldrums”.

         Jan. – 1.4%
         Feb. – (-0.2%)
         Mar.– 1.0%
         Apr.– 1.3%
         May– 0.3%
         Jun.– 0.2%
         Jul. – 0.9%
         Aug.– 0.0%
         Sep. – (-0.6%)
         Oct. – 0.9%
         Nov.– 1.8%
         Dec.– 1.7%


The Stock Trader’s Almanac states that a $10,000 investment compounded to $544,323 during the November-April period over the last 56 years compared to a $272 loss for May-October. I think that sums up the significance of the historical period known as the “Summer Doldrums”. 


Keep this in mind as we move into the summer months. Corrections happen. Flat periods happen. The market can’t continue to advance in this manner without corrections and lengthy consolidation periods. This is the nature of the market. Consider learning alternative investment strategies as a way to diversify your current portfolio so that you are better equipped in any market environment, bullish bearish or neutral.

Market Comments

U.S. stocks fell, sending the S&P 500 to its first back-to-back weekly decline since November, after employers added fewer jobs than estimated and investor concern over global economic growth intensified. The S&P 500 declined 2% to 1,370.26, its worst week since Dec. 16. The decline came even as the benchmark index for American equities had its best two-day gain of the year on April 11 and 12, sparked by optimism about earnings and signals from the Federal Reserve that interest rates will remain low. The Dow lost 210.55 points, or 1.6 percent, to 12,849.59.


All 10 groups in the S&P 500 also slipped after China’s gross domestic product slowed more than forecast. Financial shares fell the most, sinking 2.8%, as Bank of America tumbled 6%. Apple sank 4.5% for the biggest weekly loss since October.


“There are still macro concerns that are weighing on the market right now,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said in a Bloomberg interview. “Economic numbers haven’t gone off a cliff, but the key is they are a little weaker than people expected,” he said. China and Europe “are concerns for us as part of the overall puzzle.”


Worries over the health of Spain came to a head on Friday after it was reported net borrowing by Spanish banks from the European Central Bank surged to 228 billion in March from 152 billion in February. The news sent Spanish CDS up to a record high, and caused its 10-yr yield to climb back above 6.00%.

Technical Mumbo Jumbo

The top that has been forming in the S&P 500 since mid-March looks quite bearish at the moment. Thursday surge followed by a sharp decline Friday really took the bulls by surprise and took the air out of their sails.

However, if the bulls can manage to muster one last push through 1400 then a case for continued bullishness can be made. Until then I will be watching carefully to see if the S&P can push below 1350 and then 1330. If we see a decline through 1330 then test of 1300 looks likely.

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