As a stockbroker years ago, I remember telling my clients to “sell in May and go away”. That got me thinking about the current market condition. I imagine that some nervous investors (or short-term traders) may start to do some selling in an anticipation of a possible May pullback. That’s exactly what happened last May. Adding to those concerns is that fact that the market is in a short-term overbought condition. This afternoon while I was writing this post, the market sold off 100 points. I had to smile as I looked at the title of my post.. “get out in May and stay away”.
In the following chart, VIX is starting to climb … Another short-term cause for concern is today’s jump in the CBOE Volatility (VIX) Index. That’s because the VIX trends in the opposite direction of the market. The VIX has been dropping since early March when the lastest market upleg began. The daily bars show the VIX reaching a four-week high today and breaking its resistance line. The daily MACD lines, which have been negative for two months, turned positive today (red arrow). A rising VIX is usually a warning that the market is vulnerable to some selling.