Sell in May, and go away

This old rural saying should be taken into account in 2012 again! There’s a new study by the US analysts Yale & Hirsch considering the Dow Jones through the years 1950-2011 that found out this: A speculator who in 1950 invested 10,000 US dollars into the Dow Jones would have earned 619,071 US dollars provided he was in the market only in the months of November until April. However, being invested in the months of April until October the speculator would have produced losses of 1.024 US dollars within 62 years.

The reason for this very unambiguous cycle seems to be the pronounced rhythm of the Americans concerning the delivery of their tax declaration until March 31. The pending additional charges of the IRS make the tax payers sell a part of their stocks in May to settle their tax liabilities. There are anticipation effects as well: If the months from January to March pay well (as seen this year) the stock sell-off is often being anticipated in April, so the April corrections happen – as in 2012. Such a phenomenon uses to happen outstandingly often in president election years… as this year.

After this April correction there’s at least another approach to the spring highs in May. Now GUNNER24 is even putting out some new year-highs in May before the correction is expected to begin with the mild summer months. The correction course depends on the way this last upswing of the rally extends. A strong final exhaustion results in a profound and “long lasting” correction. Just in case of a marginal year-high the correction over the summer months will be moderate as well:

The actual monthly 3 Candle GUNNER24 Up of the S&P 500 is showing that the market is targeting the upper line of the 3rd double arc after the correction on daily basis that seems to have come to its end. Since March closed within the lines of this double arc and April is going to do so as well reaching the next higher target is still to come. The minimum target of the spring rally is at 1435. An 1461 extension until the end of May is possible but not very likely. Technically that target cannot be reached unless next week some clearly higher year-highs will be made.

The preferred target of this rally is at 1448. It was activated by the middle of March in the actual weekly 5 candle. With the break of the first double arc the 2nd double arc was determined as to be the target: Here’s again our weekly S&P 500 long-entry, published on 3/18/2012:

Two long-entries on daily basis were triggered last trading week in the Dow Jones and in the NASDAQ-100.

On Wednesday the Dow Jones broke through the daily resistance of the 3rd double arc:

As lately announced here hence we went long. Entry was at 13090. The most likely target of this last upswing is now the horizontal resistance in the center of the just passed square. With more than a 70% of probability the official target now is the 4th double arc at 13930!! But with the situation of today I really can’t imagine that the Dow is willing to extend that thigh. Technically such thing can only happen in case officially QE3 is being announced.

After reaching the daily horizontal resistance at 13550 the market is supposed to correct stronger by the end of May/beginning of June, getting caught then, not reaching the 4th double arc before July producing some lower daily highs there and falling stronger until September.

Resistance now will always be the 1*1 Gann Angle, a closing price above it won’t be possible any more. Now all the mini-corrections shall have to be ended until reaching the 13550 target at the support Gann Angle.

Also in the NASDAQ-100 our long-entry came up. As lately analyzed in the last issue by the Monday close we went long at the first daily close below 2655:

See above the actual weekly 5 Candle GUNNER24 Up Setup we use as a signal setter. On Tuesday the 2*1 Gann Angle was newly reached producing so much rebound energy that now some new year-highs are very likely.

Just consider and compare both week candles in both successful tests of this 2*1 angle. Both candles are outstandingly long, that’s how the power of this 2*1 angle shows. Well, if the market performs as it did after the first test of the 2*1 we’ll see ta few more weeks of even ascents. I think the lower line of the 3rd double arc is not the final target of this swing. The upper line at 2838 seems to me more plausible.

The actual candle still remains beneath a GUNNER24 Resistance Diagonal. If at the beginning of next week a higher daily close than the Friday close is made as early as by the end of next week the lower line of the 3rd at 2799 might be reached. That would mean a new year-high! In this index the maximum exhaustion target of 2917 seems to me thoroughly accessible on the tide of this last upswing!

Gold downswing ended

Being an old gold bull for the moment I’m glad that the endless fathoming of the final lows of this correction is over for now:

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