April 2011 Review, May Preview

SELL! SELL! SELL!

It’s May and you know what that means! But before we venture into the future, let’s recap what happened in a very active and volatile April 2011 …

The fifth batch of the Tutorial’s Coaches Tutelage (CT5) graduated on 26 April after their extended 8 week guidance. This was by far the noisiest and most energetic bunch to date. On behalf of the coaches – Roy, Leon, Dianah and Jason, along with the volunteer coaches Yichuan, Soon Ghee, Adeline and AT, we would like to wish all in CT5 “Happy Hunting and all the best” in their journey to becoming a Trader! Remember that we’re still here for you!

Jingting and Peifen even made these amazing dedications for all the coaches …

This is mine …

On Sunday 4 April 2011, another huge bunch of investors graduated from Wealth Academy in Singapore.

MARKET MATTERS

On the market front, in the U.S., earnings season  is now past the halfway mark and things aren’t looking all that convincing although earnings haven’t been that bad. A massive rash of M&As helped rally the month with no less than 12 major deals taking place. April also saw the threat of a government shutdown that would have compromised 800,000 jobs but lawmakers reached a budget deal just before the deadline, which cut spending by $78.5 bln from the President’s FY11 budget request and averted that shutdown. In mid April, Standard & Poors revised their ratings outlook on the U.S. to “Negative” from “Stable” and the end of April saw Ben Bernanke’s first Fed press conference which indicated little change from prior policy statement while acknowledging that inflation had picked up.

In Europe, sovereign debt downgrades continued into April: Moody’s knocked down Portuguese bonds down a notch. and Moody’s downgraded Ireland by two notches to Baa3. Major European equity markets, however, posted solid gains in April: FTSE + 2.2%, CAC +3.0%, and DAX +6.7%.

In Asia, attention continues to be fixated on Japan’s earthquake/nuclear crisis and China’s battle with inflation. In Japan, earthquakes, including a 7.4 magnitude quake early this month, continue to rattle to the country. Furthermore, the nuclear crisis level was raised to 7 from 5, representing the highest level, and one that is in-line with that of the Chernobyl crisis. S&P lowered its outlook on Japan to Negative… China raised its 1-yr deposit rate and 1-yr lending rate by 25bps early this month. Speculation of further tightening in China continue to pressure Asian stocks. Asian equity markets posted mixed results with Nikkei leading with +1.0%, followed by Hang Seng +0.8%. Shanghai -0.6%, and Sensex -1.6%.

On the final day of trading, gold advanced $25.10 to $1556.30 per ounce and extended its move into electronic trade so that it registered a new record high near $1570 per ounceSilver prices settled $1.02 higher at $48.54 per ounce. During pit trade the precious metal pushed past $49 per ounce to reach its highest level in more than 30 years. Oil prices pushed to a new multi-year high above $114 per barrel before it settled at $113.84 per barrel with a $0.93 gain.

Strength among commodities came amid renewed selling in the dollar, which was recently down 0.2% against a basket of competing currencies. That keeps the Dollar Index near two-year lows.

All three benchmarks are at multi-year highs with the DOW (12,810.54) and S&P500 (1,363.61) at 4 year highs while the NASDAQ (2,873.54) sits at an eleven year high. Volumes, however, remain weak as High Frequency Traders and Fund Managers limit their participation as a result of the measures that were put in place earlier in the year. Divergence has been evident in the last two weeks of April as market internals, bonds and volumes don’t tally up and don’t make sense.

The wind is blowing with the smell of caution.

MAY PREVIEW

Sell in May and Go Away” … that’s is how every trader responses to this infamous month of the whole trading calendar year.

Trivia For May
May is the second month of the most whipsawed quarter of the year – April up, May reverses, June down – and is notorious for having the worst sell-off of any month. May starts the worst six month of the year on the DOW and S&P500. Since 1951, pre-election year Mays have not faired well, constantly ranking amongst the bottom three months of the year based on performance.

Other May Stats:

Commodities;

SUMMARY

Although the final week closed up and the U.S. equity markets posted strong gains in April: S&P 500 +2.7%, Nasdaq +3.6%, and Dow + 3.9%, my verticals on financials have paid off quite well as they were the weakest sector of the month. I am going to put on more verticals in the coming weeks and if the market shows more signs of an on-coming capitulation, I will be selling calls against my long stocks.

All in all, it was a very profitable month even as I was busy almost every trading night. Even my stubborn and constipated EWJ made great gains by the end of the month. Oil has been a good trade and Silver continues to defy the odds. Although the season for Gold, Silver and Copper should be ending in April, one can never discount foolish and ignorant money making a late entry into a game that is long overcooked. I will be looking for entries for verticals on GLD, SLV, JJC and DBB.

Monday is a trading holiday in Singapore but America will be open for business as usual.

So to all our local traders, I would like to wish you all a Happy May Day and an enjoyable long weekend ahead. Make it count by spending extended quality time with the ones you love, cherish and mean the most to.

Happy Hunting and Good Health to all!

Conrad.

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Comments

Can any of your technical/fundamental analysis theories be still practical to apply to trade Gold/Silver market. The
trend now is all the hot money are going into this precious
metal market . Seeking your honorable advice .

There is nothing technical about gold and silver anymore. The irrational late rush of foolish money into these counters have made technicals unreliable. If you know what divergence is, then you’d know what I’m looking at.

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