The DOW, S&P 500, NASDAQ, and Russell 2000 are all in strong uptrends; therefore, my rating going into next week is that the Bulls have a strong advantage over the Bears.
Market internals mostly support that view although we had to throw out the Elder system applied to SPY this week because we had a split signal in two different time frames.
Most Institional Buying All Year Last Week
Probably the most impressive evidence of a strong bull rally is from the TICK which showed HUGE institutional buying on Tuesday, Wednesday, and Friday of last week. Wednesday was the highest reading on the TICK in more than a year which suggests heavy institutional trader activity.
Institutional traders mostly bought Materials, Industrials, Technology, Finance, Utilities, and cyclical stocks. Last week confirmed a breakout in cyclical stocks which is a great sign for the economy. Cyclical stocks are the first to move up on an improving economy, and the first to move down on a bad economy. The reason is that cyclical stocks are companies that people tend to buy their products and services when they have more money like houses and cars. Non-cyclical stocks are things like toothpaste and toilet paper that people are going to buy no matter how bad the economy gets.
Among recent gainers, offensive sectors tied to economic growth such as technology and financial stocks have been catching up after lagging for most of the year.
What About Sell In May and Go Away?
With the Dow and the S&P 500 hitting more record closing highs last week, the start of the weakest 6 months of the year and the “Sell in May and Go Away” may come later this year or simply not at all. About a month ago I told subscribers to use the S&P 500 MACD in the Weekly time frame to confirm a sell signal and the start of Sell In May. If you did not listen to me then you were headfaked by a MACD sell signal in the daily time frame a few weeks back. Let’s continue to look for a MACD sell signal in the Weekly time frame on the S&P 500 and continue to trade the long side until/if we get it.
Fundamental analysis reports with the greatest probability of moving markets next week are:
Mon – May 13, 2013 = Retail Sales
Wed – May 15, 2013 = Industrial Production, Producer Price Index
Thu – May 16, 2013 = Consumer Price Index, Housing Starts