Stock Market Experiences A Bit of May Selling

By: PhilStockWorld

Courtesy of Doug Short: Tuesday was a light day for economic news. The trade balance for March was down slightly more than expected, but not enough to contribute significantly to the Second Estimate of Q1 GDP. The S&P 500 opened fractionally lower and sold off to about the 1876 level, which provided support until after the lunch hour. It then sold off to a lower level and accelerated its losses in the final 20 minutes. The index closed at it -0.90% intraday low.

The popular press (e.g., Bloomberg and CNBC), always eager to explain the market, attributed today’s bad mood to AIG’s weak earnings, its stock losing 4.14%, and Twitter, its stock plunging 17.81% after a lockup expiration.

The yield on the 10-year note finished at 2.61%, down 2 bps from Monday’s close and 1 bp off the 1014 low. The 10-year yield is well off its 3.04% close at the end of 2013.

Here is a snapshot last five sessions.

Here’s a daily chart of S&P 500. Volume remains below average, but up from yesterday positive trade. The last two sessions lows are just a few points above the 50-day moving average of price.

A Perspective on Drawdowns

The chart below uses the percent-off-high strategy for illustrating the drawdowns greater than 5% since the trough in 2009.

The S&P 500 is now up 1.05% for 2014 and 1.32% off its April 2nd record close.

Here is a longer perspective, starting with the all-time high prior to the Great Recession.

For a better sense of how these declines figure into a larger historical context, here’s a long-term view of secular bull and bear markets in the S&P Composite since 1871.

- Phil

www.philstockworld.com

Philip R. Davis is a founder of Phil's Stock World (www.philstockworld.com), a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to eHarmony.com. Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (www.philstockworld.com)

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