Buy In May And Go Away?

Time and Price cycles were pointing to May 19^th as a potential important turning point.

On May 18^th, the SPX broke out of a 7 week choppy flat formation above our key 4187 level.

The breakout above 4187 saw a gap up on May 19ith which turned into  a sharp and quick 108 point reversal over the next few days

From 4212 to 4104.

Indeed it looked like May 19^th had nailed an important top as the SPX slid back below the breakout point; however, it held at the bottom of the consolidation after turning its 3 Day Chart down.

As you know, we use turns in the 3 Day Chart to identify near term changes in trend.

The 3 Day Chart proved its worth as it defined a low on May 24^th.

The 3 Day Chart turned back up immediately on May 30^th.

The SPX traced out a little one day pullback on May 31^st.

From there, a buying riot broke-out.

June has seen a market stampede.

While it may be related to a gamma squeeze from elevated call buying for today’s June Opex following the breakout, theoretically we may be in the heart of a meltup.

As long as the SPX holds the breakout pivot the door is open higher.

Maybe.

Maybe because interestingly going into today’s Opex it is possible that a Wave C = Wave A.

Allow me to explain.

From the October 3491 low to the December 1^st 4100 SPX high is 609 points.

From the March 13^th low of 3809 to 4418 is 609 points.

Yesterday the SPX struck a high of 4439 closing at 4425.

If the market should turn down from here that could be considered a direct hit.

However, continuation above this region is another potential sign that we are in the heart of a meltup.

I know, I know…if I’m entertaining the idea that a meltup is possible, this must be a top.

However, I’ve flagged before that one factor that had me on my heels about a top is two of the biggest blow-offs in history

Started from May lows.

These of course were 1987 and 1929.

Both started from May consolidation lows and both saw 90-100 day melt-ups into the end of August/early September.

Is this another reversing of the maxim, Sell In May And Go Away?

There is one stark difference between those run for the roses and the current speculative euphoria.

The prior two were in the context of big-picture uptrends. They capped off multi-year runs.

The current affair follows a bear market in 2022.

This weekend’s report for Monday morning will walk thru the comparisons.

The chart below has a message and a warning.

Each of the vertical brown lines defines a Danger Zone following blow-offs., including the aforesaid 1987 episode.

We currently are in the Danger Zone.

Again with a BIG difference. It is from a lower high whereas all the others are at all-time highs.

There is one other point to note.

We’ve draw comparisons to the 2000 Tech Bubble Top in this space several times.

The Danger Zone showed up in July 1999, but the market didn’t top until a second Danger Zone signal in March 2000. The Top.

So we have to be on our heels, but we also have to allow for the unthinkable.

The Truth Teller has done a good job of defining turning points since last fall.

Note each of the turns were roughly 90 days/degrees apart.

As flagged yesterday, we are 90 days/degrees from the March low and 360 degrees/days from the March 2022 Primary Low (as October was an undercut low).

The expectation is that the market SHOULD respect this cycle and pullback…at the very least.

But, if we are in the midst of a melt-up, any pullback will be short and shallow.

We’ve been highlighting July as a significant cycle. We’ll walk thru why in Monday’s report as well.