After S&P 500 hits new high, what's next?
May has been crummy for stocks for the past 3 years, and there are a few reasons to be concerned about May 2013 as well.
The Dow Jones industrials ($INDU) closed within 50 points of a new closing high.
But May starts on Wednesday. Stocks have fallen in May for the past three years, and the four of the last five years. Which raises the question: Yikes, what happens now?
If investors are lucky, everyone will be so scared by the potential for a stock market decline that stocks will go up.
But there are technical issues in the stock market that have to be considered. Here are a few of the most visible issues:
The major averages have struggled to hit their latest highs. It was not clear until literally until the last minutes of the session that the S&P 500 would hit a new high. The close of 1,593.61 was about a quarter point higher than its previous closing high of 1,593.37. New highs are welcome; struggles to hit new highs create worries.
Price/earnings ratios may be too high. As of Friday, according to Barron's, the price-to-earnings ratios for the major averages as of Friday were: 16.17 for the Dow; 18.51 for the S&P 500; and 17.55 for the Nasdaq-100 Index ($NDX). A year ago, the P/E ratios were 14.81 for the Dow; 16.09 for the S&P 500 and 11.59 for the Nasdaq-100.
200-day moving averages suggest the major averages are getting pricey. As of Monday, the Dow was trading at 9.3% above its 200-day simple moving average. The S&P 500 was 9.2% above its 200-day average; the Nasdaq Composite was 7% above its moving average. High enough to suggest a tipping point has been reached? Maybe not. An index trading 10% or more above its 200-day moving average is a signal to get a little worried. The Dow and S&P 500 traded 10% above their 200-day averages on April 11.
In addition, the market faces a number of challenges this week, including a Federal Reserve meeting that starts Tuesday and ends Wednesday. That may prove benign because no one expects the Fed to modify its low-interest rate policies.
Wednesday also brings some important reports that could affect markets. These include:
- The Institute for Supply Management's April report on manufacturing.
- Auto makers' April sales reports.
- The ADP Employment Index. It's expected to show 155,000 private-sector jobs added to the economy.
In addition to the S&P 500's close, the Dow finished up 106 points on Monday to 14,189, 46 points below its peak close of 14,865, reached on April 11. The Nasdaq was up 28 points to 3,307, its highest close since Nov. 7, 2000. The gains for the market overall were fueled by a sizable rally in technology stocks.
Apple (AAPL), Microsoft (MSFT) and Google (GOOG) were each at least 2.2% higher. Hewlett-Packard (HPQ), Microsoft and IBM (IBM) were the top Dow stocks. (Microsoft owns and publishes MoneyNOW, an MSN Money site.)
Crude oil (-CL) in New York was up $1.50 to $94.50 a barrel. But the national retail price of gasoline was $3.50 a barrel, according to AAA's Daily Fuel Gauge Report. That's down 7.6% from a 2013 peak of $3.786 a gallon on Feb. 27.
Gold (-GC) jumped $13.80 to $1,467.40. The 10-year Treasury yield rose to 1.668% from Friday's 1.663%.
Going into April's last day of trading on Tuesday, the Dow is up 1.65% for the month, the S&P 500 is up 1.56% and the Nasdaq is sporting a 1.2% gain. The Dow hasn't had a down month since November; the S&P 500 and Nasdaq haven't had down months since October.
For the year, the Dow is up 13.1%, with the S&P 500 up 11.7% and the Nasdaq up 9.5%.
|Stocks and May misery|
|Month||Dow chg.||S&P 500 chg.|
More on Top Stocks
May can be shaky....But everytime you try to time the Markets, it can be be a "tweedle-dee, tweedle-dum" choice...
So if a person/investor CAN have some extra cash set aside; May or early "Summer Doldrums"
can offer some great buying opportunities....IMO.
Buffet and Munger don't Scuttle 80% of Berkshire, to see if they can buy it back cheaper in a few weeks...
Concerning May of 2010 "only", we had some "huge run-ups" over the previous 16 months or since March of 2009..
When I hear everybody saying "sell in May", it means BUY.Corporate profits are way up,
73% of companies are beating estimates and companies are sitting on a record amount
of cash.That means HELLO Dow 16,000.
So May has been tough on stocks.
What is a lot tougher is you parasite anaylist publishing your one sided, personal opinions for public consumption.
Did you ever think about getting an honest job on a dairy farm, where you can shovel that Sxxx all you want to? Just don't stand direct behind the cow or you might get a mouth full.
It is hard to believe huge company's hire and pay you bums a salery to spread such crap. I try to not buy anything your parent company sells.
What right do you have to knock and kick a stock that consumers have a lifetime investment in??? Some young lawyer that wants to make billions needs to file a class action suit against anaylist AND the company;s that hire them.
However, this is my opinion;
Stocks might go down a little in May, however they might go up, on the other hand they might go up and then go down a little bit, but, they could rise a lot and then go down, or, they might level off and then go up and down and up again and then down and they level back off. However stocks just might go way up and crash, and then go way back up again.
I knew you would want my opinion, your'e welcome!
And the ponzi game goes on!
Just wait till the music stops!
You think the House crises was a problem?
Just wait till everyone including Uncle Sam starts to cash out.
The only reason the stock market has gotten to where it is, is because Uncle Sam is pumping it with 4.7 Billion every business day.
Until the unemployment rate reaches 6.5%, 'Uncle Ben' will continue with keeping interest low & pumping in 85 Billion a month. That's the 'trigger' as far as the Fed is concerned. And May is shaping up well for those who hold dividend stocks. Apple's stock buy back & issue of dividends alone will be a great ROI, not to mention others as well.
Just because the last three years in May were bad, does not mean this May will be as well. Yes we'll have our usual summer volatility, but overall I think the summer will be good for stocks.
If investors are lucky, everyone will be so scared by the potential for a stock market decline that stocks will go up................WTF????
maybe I'll crash my car today and it will be more attractive.....
DUCK......here comes the crash....
I generally agree with this article. I'm taking action today, pulling more out of equities, adding to some fixed-income asset classes.
Also I agree that no one who follows the fed expects any modification of current low interest rate policies. That would come as a surprise to me.
Not sure about a CRASH in 2011, without checking my books and charts.
Maybe it didn't effect us or not as badly.??
And according to Blaine's chart, May 2011 was barely equivalent to a one day correction..imo.
Maybe worst over a couple month's period ???
You may want to do your research now in case there is a sizeable correction over the next 60 days..?
I personally don't think it, will last long..
And don't jump on bandwagon of severely beaten up stock, those usually aren't good to begin with.
Maybe a 4-6% downturn..??
But right now America seems to be the "safest investment" going..
So keep that in mind, when making choices for your future..
Getting back to the current state of the Global Markets. Folks can stick their head in the sand and deny what is actually going on in the World. That just means they will be the one's hurt the most when the Real ish hits the FAN. Failing to prepare is preparing to Fail.
I use the S&P more usually gives me an idea of how my MFs will be doing. What is the point of the DOW again?
It's all a crapshoot. And I always heard April was bad on stocks, Hmmm.... Own some good quality 4% or up dividend paying stocks, and hang onto those. Play the market game with stocks you are willing to sell on a drop, after making some nice gains. After a nice drop, and I mean 10-20%, buy back in.
Wash, rinse, repeat, and us small guy investors can win like the big boys. It's all in the game plan!
Copyright © 2014 Microsoft. All rights reserved.
Tighter regulations and the end of a lengthy bull market in bonds have changed the landscape forever.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.