Guy Cohen

Sell in May?

by Guy Cohen 13. May 2012 00:30

Well the charts look bearish, the OVI looks bearish and the count of flags looks bearish.  

On the other hand the S&P is sitting at a key support level that could bounce back up.  My hunch right now is that a break of support is likely, but for how long I'm unsure.  This is why we have a trading plan that we stick to.  If we're right, all well and good.  If we're wrong we either don't get hurt at all, or at worst it's only a blip.  

The short would only be if March's low is breached, but I'd recommend a tight stop.  Notice the OVI has been negative for all but one day since the beginning of April.  In simple terms it means that options traders have been rather bearish on the S&P during this time.  The high was achieved on the first trading day in April, so you have to give credit to the options traders and the OVI for getting it right - because we're now forming a bear flag (or reverse cup and handle) at an important support level.  

spy 2012.05.11.jpg

OVI Dashboard
The count for bear flags is now significantly higher than for bull flags.  A few weeks ago I highlighted that our indicators were suggesting bearishness to come, as the numbers seemed to be changing for the worse, and we were right on the mark with that too.  

dashboard 2012.05.12.jpg

While AAPL is looking more vulnerable than for a long time, AMZN has held up remarkably well and not filled its gap ... well not yet anyway.  Some folks believe AAPL's next move is to buy a bank and effectively attach it to iTunes.  Who knows about that, but in order to sustain its incredible run it does need to add new products that capture the imagination.  Television sets seems a possibility.  I only know that my TV sets have way too many confusing controls on the remote, and I still don't know what to do sometimes.  So one simple and superior solution would grab me now that I'm in the iWorld!  


aapl 2012.05.11.jpg


amzn 2012.05.11.jpg

A quick look at some other stocks in our "OVI Express40" within the OVI Traders Club.  Many of these stocks are seeing bear flag and support levels being breached, where typically the OVI has shown a negative reading well in advance.  

qqq 2012.05.11.jpg

rimm 2012.05.11.jpg

bidu 2012.05.11.jpg

qcom 2012.05.11.jpg

hpq 2012.05.11.jpg

Now for some non-tech stocks: 

bac 2012.05.11.jpg

gs 2012.05.11.jpg

chk 2012.05.11.jpg

slb 2012.05.11.jpg

mcd 2012.05.11.jpg


All the best