We are just a week away from Memorial Day. Aside from barbeques, trips to the lake and respect for our veterans, Memorial Day has a different meaning in our business.
First it means we are nearly through the first month of the ‘go away in May’ selling sequence for equities. It also gets us that much closer to the beginning of the peak of driving season for the oil market. Does every year follow form? You know the answer to that. In 2011 when the oil market hit the perfect Fibonacci/Gann storm the oil market crashed in May. During this 5-year period since the bottom we’ve also experienced plenty of inverted markets that stayed up the majority of the year. The conventional wisdom says markets will continue to stay up as evidenced if you just take a peek at the VIX.
But this is no ordinary year even as we are getting new all-time highs in places like the the S&P 500 (CME:SPM14). It’s interesting how these markets backed off as the SPX is less than 1% away from another important square of 9 calculation at 1920. The Dow stalled just south of its own important Gann reading at 17,011. If these charts want to get there, they can do it in a day or 2.
But here’s what’s at stake:
The Dow(CBOT:DC) and SPX how represent a potential ending diagonal wedge which are in development and not yet complete. I’ve been waiting well over a week to see how the Dow formation will play out given the rising trend line. It could’ve hit it last week but instead surged to a 2nd new high instead of touching the rising bottoming line. It could touch it and give us one more high and that could be it. As it closed last week on the 50-daily moving average it could break right here and that could also be it.