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| Stocks: Quickie IV -- Go Away in May Remains the Operative Theme! - May. 24, 2005 |
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Summary
I continue these short pieces because I think the stock market is at or is quickly approaching its most critical juncture of 2005 so far. These updates are a bridge to the more detailed rendition I have docketed for next Monday.
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Yesterday's equity-market behavior was very much in line with what I thought it might be, and as was outlined in yesterday morning's "Quickie III." To wit:
"The stock market enters the current week about as short-term overbought as it has been in quite a while. A good deal of this is the result of extra 'juice' supplied by last week's options expiration...
"The expiration is likely to add more juice today, since there were probably exercised call options where the stock that needs to be delivered against them must now be purchased. And since the bulls are out in force painting charts and the like, strength today could spill into tomorrow.
"...But I think this will about do it for a while...If all goes per this particular script, don't be shocked if stocks have an overall week that is different and worse than the way they are beginning it."
Let's zero in on, "...the bulls are out in force painting charts and the like. ..."
What showed up after yesterday's close? The daily wrap-up from those loveable folks at The Street.com, with the headline of the main story reading, "Bulls Won't Back Down."
A sampling of this highly upbeat article:
"'Today's activity was important, rounding off last week and getting us off to a good start this week,' said Paul Mendelsohn, chief investment strategist with Windham Financial Services." And...
"'People are feeling more comfortable with more smaller investors getting back into the market, a sign that things are getting better,' said Robert Pavlik, portfolio manager with Oaktree Asset Management. 'There's hope that the signs of the economic slowdown are a passing phase.'" And...
"'The three major averages move largely in step but take turns leading or lagging, depending on which industry sectors are in style,' said Ken Tower, chief market strategist with CyberTrader. 'If the Nasdaq is to test its December high, it would follow that the Dow and S&P might advance 3% to 5% above their March highs.'"
Of course, this kind of stuff was pervasive yesterday, part of the recent and growing crescendo designed to encourage investors to engage in very smart -- or very destructive -- behavior.
Which will it be?
As the saying goes, the fullness of time will reveal the answer. However, my own view remains unchanged. I believe the fullness of time will show what a productive idea it was to use the rally to raise a lot of cash and -- "go away in May."
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