The Possibility for a Contra-Seasonal SP500 Rally
developing in May and running into June is quite strong, imo. I also see Gold, and T-Bonds participating in that rally, as we emerge from the flat 2005 SP500 performance, which dead-into the mini-crash drama, week before last.
Econ data and earnings are very mixed. They're all over the place, with good cases being made by both bulls and bears.
I remain a structural bear on the US economy, have been for several years, and think it will indeed end in a disastrous conflagration. But the salivating for that outcome among the smarat bears once again started too soon. The reason: although I think the Fed Chairman is a charlatan and a robot, he has indeed sucessfully re-flated the global economy. Even if that economy is on very shaky legs, a certain momentum has taken hold and is now off and running on its own.
It's probably not sustainable. But it's got enough momentum to frustrate the hell out of anyone trying to get long-term short the market.
I advise my friends: think like the smartest of shorts right here, who does not merely want a brief trade, but wants to make boatloads of money on the back of some really painful US stock market misery.
You still have to wait. We've got some really big comedown in Inflation expectations about to emerge into the market's consciousness. Regardless of what your ultimate view of inflation is, a moderation of the recent inflation fears is already at work in the market and has got more room to run here. We may even move much farther back towards a deflation scare than most anticipate. Hence, the T-Bond rally has further to run.
Now, just so people on this board know where I'm coming from, I am almost certain this ends in a dollar down, T-bonds down, stock market down conflagration.
But that moment has not yet arrived. Even if those who've been trainspotting for it, think it's here. It's not.
Finally, I cannot see a resolution to the Energy Stock trend, without at least, either a) 2 more strong uplegs like the one we had in FEB, or, b) a panic-buying upleg which would be part of a Flight Into Real Things. If the latter happens, it will knock your socks off on the upside, and do the same shortly thereafter on the downside.
I am looking to lighten up on some energy positions during the May rally which I see extending into June. I then intend to start averaging into Puts on the XLF.
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