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Vito J. Racanelli of Fundstrat Global Advisors

Professor Stephen Nagy, Distinguished Fellow Asia Pacific Foundation

The Passing Game Becomes The Ground Game

Seems like the stock market has moved into the ground game phase of a recovery from March lows. I say that because it was a tug of war last week, with stock rising nicely though Wednesday, only to give all of it back and a bit more by Friday.

There’s an old football phrase attributed to—not necessarily correctly—to Woody Hayes, the old Ohio State football team coach: there’s “three yards and a cloud of dust.” I think it applies to last week’s market action. The Standard & Poor’s 500 index (SPX) finished at 2831, basically a few points lower than the previous Friday

Actually, April was the big pass offense by stocks but more lately we’ve eased into the ground game, back and forth action. Moreover, despite a humongous rise in April, May marks the beginning of what is historically a less good season for stocks.

According to Bespoke Investment Group, April has traditionally been the best month of the year for stocks, and this one didn’t disappoint, up 13% following a March where stocks fell 12.5%. Wow. Bespoke also notes that after 10% down months the market is up nearly 18% on average 12 months later, and we are already a good way there.

Veteran traders know that the traders’ almanac shows that markets tend to rise in November-April and give back in May-October. In fact, in this past Nov.-April period the market was little changed, finishing at 2912 in April, or a few percent down from 3037 at October’s end. Of course, despite that small change, the in-between turned out to be a war on investor nerves. Since that was a reversal of the traditional moves, perhaps this May-October will fare better.

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