PAUSE

We are going to stick as close to the current situation as possible and try to advise you on the near term course of the market.  As we have said over the past few weeks, there is the potential for a lot of volatility right here and the reason is that the market is beginning its turn from an up move to a down move.  This action was on display today.  When we say the market is going to volatile, we mean that it is likely to go up and down without much trend in sight.  This is typically called “whipsaw”.

Today’s action in the Dow showed a good sized drop of about 75 points at the opening and then just vaulted higher after the first half hour.  From the down 75 points going up 110 points in about ten minutes and then falling about 80 points right after that.  So, in an hour and a half, the Dow moved down 75, up 110 and down 80 for about 265 points—that is called “whipsaw” and it is very tough to trade.  The point is that it is signaling a turn in the market.  We can’t tell you how long we will see this volatility but with all the bullishness out there, we expect the bulls to put up a good fight…a losing battle in our opinion but a fight none the less.  

After the first hour and a half the Dow proceeded to go on another 120 point up move, this one lasted nearly two hours and was pretty much a steady grind higher.  The net of it being that the Dow ended up about 28 points but based on the ride, you could say we traveled about 450 points on Thursday.

“What caused this action?” you might ask.  Well, we note the new Fed Head was speaking about the possibility of the Fed pausing in their interest rate hikes.  So, don’t you think that is what the market has been waiting to hear?!?  So, was the Dow up 350 points celebrating?  No, it wasn’t.  So, what was moving?  Normally, a loose monetary policy leads to weakness in the dollar which is exactly what happened.  The rest of the action was “scratch your head” type action, commodities were down, bonds were up and the stock market was, well, undecided really.

Then came the bomb after the close from MSFT.  While the news out of MSFT was nothing too surprising, such as Xbox is selling well but we lose money on every one we sell.  But, MSFT has not been really doing anything as far as price movement for many years and their entire earnings announcement did not leave a good taste in the after hours market.  The price dropped about a $1.50, over 5%.  Surprisingly, it didn’t really carry over into the rest of the tech sector.

When Japan opened this evening, there was a loud thud as the Nikkei Dow dropped about 300 points or 2%.  We think that the US market might be a little stressed in the morning, too.  As bears, we wouldn’t be unhappy if that was the case but we know that the era of volatility could still be in tact so we need to be a little cautious as we go into trading on the last day of the month.  We have failed to mention the end of the month strength the last few days but we always note divergences from this pattern.  Friday’s trading could be a big divergence.  Then there is the weekend to think about it and next week is May.  

You know the Motto…”Sell in May and Go away”, usually till September or October.

Be careful out there…

Dow Industrials:  11,382.51  +28.02
RYVNX:   18.08
RYAIX:  21.72
TLT:  84.10
BEGBX:  13.25  (dollar gets hit again)