May is Almost Over, and Nobody is Selling

Amazingly, the S&P500 continued to climb higher. Last week, it added another 1.4% and in the process, it set another new all-time high. As usual, volume was light—so this jump in prices did not happen because investors poured new money into the equity markets. Very likely, some of the last remaining short sellers covered their losing bets, leaving most investors and traders—once again—almost all invested on the long side. And supporting this theory is the VIX Index which obediently retreated back down to its multi-year lows.

If you’re a US equity investor, everything looks just fine.

In macro news, the story of course is not so rosy. Last week, the Chicago Fed national activity index registered a stronger than expected result. Also, the FHFA house price index beat expectations. Durable goods orders looked better on the surface, but core orders (excluding transportation) they plunged, missing badly. Other bad news came from new home sales, which also plunged and missed consensus estimates. The Richmond Fed manufacturing index missed badly. Existing home sales also missed. International trade missed as well. So continuing the pattern of the last couple of years—while Main Street USA struggles to progress, Wall Street is enjoying a raging party.

In terms of technical analysis, the S&P500 is now is as overbought as it’s ever been. Prices on the daily, weekly and monthly resolutions are hugging the upper Bollinger Band, something that we don’t usually see simultaneously on all three time frames. Also, the S&P has jumped back well above the 50 day moving average, and the 200 day is sloping comfortably in an upward direction.

Finally, what makes this most recent all-time high more interesting is that it’s happening just as the month of May is ending. Seasonal data shows a historical pattern where equity index prices typically tend to give back some gains by the end of May; that’s where the old saying “sell in May and go away” comes from.

But this May, with June starting just a couple of days from now, the S&P500 is still setting records. Once again, this is confounding market experts who continue to be amazed that nothing, truly nothing, seems to be able to faze this US equity bull market.


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