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| Stocks: Quickie II - May. 19, 2005 |
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Summary
What a difference a week makes! But investors with insufficient cash for the next trip down would do well not to overstay their welcome in the current rally.
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Last week (5/12, "Stocks: A Quickie"), I wrote:
"I want to point out that some technical work is kicking in suggesting that the reflex rally off the late-April lows is getting tired and looks like it is getting close to rolling over. Today and tomorrow's combined results could be key in the overall process, but I would not be shocked to see these two trading sessions team up for a net negative outcome."
Those were good "tea leaves." Over the following two days, the market got beaten up pretty badly, with combined declines for the tracking group averaging 1.4%. This week, however, the market has gotten all that and a good deal more back.
* The reason attributed to yesterday's spike was the much better than expected results for the CPI. As a reason, it was moronic. As an excuse, it was fine.
* I continue to believe the early March period was the confirmation that the cyclical bull inside the secular bear had ended, and that the secular bear had reemerged as the operative trend.
* After four consecutive mediocre expirations -- overall, they worked out to something worse than "mediocre" -- the LaSalle Street/Wall Street axis powers were determined to be sure four would not become five. It looks like they have succeeded.
* But that is what I see this week as representing: A prototypical expiration-week setup.
* If, on balance, stocks wind up this year in shabby shape -- still the outcome I am looking for -- people who suffer the consequences will really kick themselves. They will look back to the early months of 2005 and the several chances the market afforded them to raise cash on relatively favorable terms and wish they had.
* In my view, the current rally is providing another of those opportunities. However, it is getting late in the day.
This week's rally has been sharp. When it reverses, I expect the ensuing sell-off will have the same characteristic.
* The market's overall behavior during 2005 to date gives every appearance that if you "go away in May," you will be a happier camper than if you do not.
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