Do you like the big rally? Watch out for May

It's great the Dow and S&P 500 have hit new highs and the Nasdaq is at a 12-year top. But beware the post-April slump.

By Charley Blaine Apr 11, 2013 8:42AM
Arrow Up © moodboard/CorbisUpdated: 4:30 p.m. ET Thursday

Wednesday was what stock market people call a breakout. That's too polite. It was a big freakin' breakout.

The Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) hit new closing and intraday highs. The Nasdaq Composite Index ($COMPX) had its best close since November 2000.

Now the question is what happens next. Stocks were mostly rallying Thursday. The Dow closed up 63 points to a record 14,865. The S&P 500 added 6 points to 1,593, also a record, and the Nasdaq managed a 3-point gain to 3,300, its best finish since November 2000. This despite weakness among Microsoft (MSFT), Hewlett-Packard (HPQ) and Intel (INTC). (Microsoft is the publisher of MSN Money.) 

But the more important question is what happens after the end of April. For the past three years, the market has swooned starting around the end of April. The swoon can last as little as a month or as much as five months. And it startles investors.

In 2012, the Dow dropped nearly 9% between May 1 and June 4. In 2011, between April 29 and a decisive bottom on Oct. 3, the decline was 16.8%. The 2010 swoon, between April 29 and July 2, was 13.3%. And the Dow's gains for each year: 7.3% in 2012, 5.5% in 2010 and 11% in 2010.

The S&P 500 saw similar drops and ended 13.4% higher in 2012, flat in 2011 and up 10.2% in 2010.

Most analysts have long been expecting a market pullback. The problem is they've confidently called the imminent arrival of the pullback for at least three months.

The market, however, has largely ignored warnings that cuts in federal spending, the European debt crisis, the Cyprus banking crisis or tensions in Korea would doom the rally.

At some point, the warnings will be correct. The odds favor a correction starting at the end of April, possibly because it will be clearer that sequestration -- the imposition of federal spending cuts -- is taking a bite out of the economy.

The Stock Traders Almanac reminds us that the market's worst six months start on May 1.  From 1950 through 2011, the Dow gained an average 0.3% between the end of April and end of October. The average gain between the end of October and end of April: 7.5%.

It is quite possible the market will enjoy a decent April. Wednesday's rally and the continuation on Thursday is a reason. With Thursday's close, the Dow and S&P 500 were up 2% and 1.5% for the the month. The Nasdaq was up 1%.

For the year, the Dow is up 13.4%, with the S&P 500 up 11.7% and the Nasdaq up 9.3%.

It wasn't just that the Dow and the S&P 500 closed at record levels on Wednesday. It was the energy with which both indexes reached intraday highs.

At its high of the day, the Dow was up 153 points, or 1.04%. The S&P 500 at its peak was up 1.3%. The gaps between the prior close and the day's high were the highest in percentage terms since Jan. 2.

But the Dow Jones Transportation Average ($DJT) and the Russell 2000 Index ($RUT) are down 1.5% and 0.5% in April, respectively. The latter two are watched closely because they tend to lead the market. 

One more concern: Gold (-GC). The metal was up $6.10 to $1,564.90 an ounce after falling to $1,558.80 on Wednesday. Gold is down 6.6% for the year. Some analysts believe the tumbling isn't done yet.

More on Top Stocks
Apr 11, 2013 10:39AM
You have to wonder about how a Market continues to rise in the face of massive Global Money Printing and Massive global debt. Something really fishy is going on here and everyone knows it.
Apr 11, 2013 10:56AM
If we can just get a mediocre to crappy jobs report and GDP report in May and June, this could be the best summer the market has ever had.  Cyprus could fall apart, the Euro could disband, Japan could fall off into the ocean and it wouldn't matter, because we'll continue to get our $85 billion shot in the arm every month, courtesy of the Fed.  And like any hard-core addict, the regular shot in the arm is all we really need to sustain ourselves until it's time for the next one.  Our spouses can leave us, DSS can take our kids away, our house can fall down, we can go without food and bathing, it doesn't matter, the shot in the arm is everything.  In fact, it's our only thing, and by God, we'll do whatever is necessary to continue to get our fix - lie, cheat, steal, pillage, plunder and whore ourselves out to anyone who can help us get our monthly juice.
Apr 11, 2013 11:01AM

The market could go up for  a while, but then it's going to go down for a while.

Remember, you heard it here first.

Apr 11, 2013 11:36AM
"At some point, the warnings will be correct. "

Yeah, like a stopped clock

How about tea leaves do they say anything?

Apr 11, 2013 11:23AM
I think analysts' predictions have more to do with their own positions than reality. Nobody can see the future.

Flip a coin. You'll be right as often as they are.
Apr 11, 2013 1:04PM

"The market seems to touch the 200 day moving average every 6 months or so. Given that the Dow is up around 12% year to date, we ARE due for a pullback. I'm moving to cash for the next 90 days. Hopefully I don't regret it."


Too late. You are talking technical aspects... all Bernanke knows is duct tape and a siphoning hose. That giant sucking sound you hear is our existence getting blown away by bad banks and rotten QE.

Apr 11, 2013 12:45PM

Ben Bernanke, during his appearance before Congress on March 4, 2009:

Senator Sanders: “Will you tell the American people to whom you lent $2.2 trillion of their dollars? … Can you tell us who they are?”

Bernanke: “No”


It's all corrupt.   Truth is found in the 2nd amendment.

Apr 11, 2013 11:47AM
Psychologically, the ups and downs of the market torment some people.  But if you are in an automatic purchase program, you should be rooting for some minor dips so that your purchases buy more shares.  For me, that removes all stress about market fluctuations!
Apr 11, 2013 11:55AM
Just keep predicting a slump. You will be correct sooner or later.
Apr 11, 2013 10:54AM

"Something really fishy is going on here and everyone knows it."


The statement of the day! There won't be any mercy... they have killed America and done irreparable harm and damage. What kind of psychopath bails banks, bad business platforms and administrative degrees ahead of everyone else who would have been integral and instrumental in a recovery? If it's as stupid dumb as- Ivy League collusion or a Skull and Crossbones Club, I sense some genetic purging that's likely way overdue globe-wide. Where do you run to once you've screwed the whole world?

Apr 11, 2013 11:30AM
Hey Nevada luke. Sound like a gambler to me. Which you are if you're in the abyss called the stock market. It's all about "bend over Ben." Pure and simple. And NO this isn't investing. 
Apr 11, 2013 12:07PM
Many are fleeing metals.  That ride is over.
And when one ride is over, the money has to go somewhere.
Only fools put it in  a mattress.
Banks are almost as bad.
If you were selling off all that ammo you bought--that's where the profit is right now.
You can only buy so many beans and bandaids.
The money has to go somewhere.
Real estate is jumping here in Phoenix.
The key is to be first in line for the next big thing--not be the last guy buying.

Apr 11, 2013 1:37PM
The stock market is nothing but a "House of Cards," built on sand.  Do you think all this artificial stimulus and $85 Billion dollars of bond buying by the Fed has anything to do with this bogus run up?  Duh!
Apr 11, 2013 2:59PM
Another article written by an inept analyst who most likely is compensated by the NYSE -  ' a big freakin' breakout' - where have you been.  Just to break even with inflation since 2007, the DOW needs to be around 16450 today not 14686 !!!!!  Stop writing 'feel good' articles and present the facts - force all to recognize that the bulls need to run a lot harder to give back the American everyday investor what was lost.  Did I like the 'big rally' - it was a nice sprint but the bull needs to trot long to get my respect...
Apr 11, 2013 11:03AM
These so-called experts keep trying to bring the market down with all of their doomsday predictions.
Apr 11, 2013 2:08PM
Blaine trying to influence the market to promote himself ... this kind of journalism is fear  mongering! No one knows what will happen. not even Cramer
Apr 11, 2013 11:30AM
There's a lot of truth in the old adage "sell in May and go away". 
Apr 11, 2013 12:13PM
Evidently Charley has some insider trader information!  I thought this type of crap was illegal!!!!  I guess as they say the script has been written for May 2013 courtesy of Charley Blaine and company!!!!
Apr 11, 2013 8:09PM
So what is the REAL NOW and FUTURE COST OF THIS MARKET RALLY .WE all LOVE OUR COUNTRY and it is functioning but for HOW LONG and what is the long term picture and is it sustainable??????The last several years of OUTSOURCING HYPER CORRUPTION NO TRUST LOSS OF FAITH IN OUR WHOLE SOCIETY AND GOVERNMENT, MADOFF ,CORZINE. BAIN CAPITAL, MARKET MANIPULATION.THE  RISE OF CHINA, BRIC .GLOBALISM  AND A HOLOCOST OF  Debt as a legacy to our children and their children and on and on. What is the value of any of this if there is no future for what has the most value,   our children????
Apr 11, 2013 4:49PM
Those in power really believe we are all morons. They throw out blurbs like "record breaking" and "All time high" and people are supposed to be dancing in the streets. They may be dancing on Wall St, but they're not dancing on Main St. I live in a small town. Half of the buildings, where small businesses used to be, are vacant so this 'record high' is not 'trickling down' to John Q. Public. Isn't this article pretty much saying 'the gains are artificial and when the Market returns to where it should be in May don't say we didn't tell you so?' To me it's like they're saying to Main St........make your moves in the stock market now, at your peril. Wall St.......keep it up but beware of the other shoe, because it's about to drop. It's all just smoke and mirrors. Just keep printing money and pumping it into the economy. What's a $1 worth now, 18 cents?  
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