Chart of the Week: Sell in May

Friday, June 16, 2006 | 02:44 PM

Here is the classic version of the Sell in May chart:

Sell_in_may

Source: Chart of the Day 

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In 2004, we  noted you could Sell in May (but don't go away) -- part 2 is here -- as a tradable bottom was forming; Markets bottomed for the pre-election rally in August.

In 2005, we repeated the same view. The market struggled upwards after the May lows, and made some progress (not a whole lot) until Katrina.

Selling in May this year turned out to be a good strategy.

The bounce that started Wednesday can run for a coupla weeks to a month or so, but should not be mistaken for anything but a bounce. This ultimately implies a late Q3/early Q4 low

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Quote of the Day

In a Bear market, everyone loses. AAnd the winner is the one who loses the least.  -Richard Russell, Dow Theory Letters

Friday, June 16, 2006 | 02:44 PM | Permalink | Comments (6) | TrackBack (0)
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Hey, has anyone noticed what Poole and Kohn said today about inflation?

From today's WSJ online:

Fed's Poole Suggests
Rates Could Rise
If Inflation Persists

Poole:

"It's, I believe, certainly my view that if the inflation rate continues to be persistent like this, the Federal Reserve will simply have to pursue persistently policies that will keep that inflation from increasing further," Federal Reserve Bank of St. Louis President William Poole told reporters on the sidelines of a conference on monetary policy sponsored by the Bank of Korea.

Earlier, Mr. Poole said that more attention should be paid to informal sources of information in addition to official data to determine the true extent of inflationary pressure.

"Statistical studies to detect pass-through from recent energy price increases have failed to show significant effects in U.S. price data," he said in an address to the conference. "But stories about widespread pass-through are becoming increasingly common."

"We may face more inflation pressure than currently shows up in formal data," Mr. Poole said, emphasizing that his objective was "to make a general point and not to conduct a full analysis of the current situation."

And then, Kohn:

Globalization has had a "gradual and limited" effect on U.S. inflation in recent years, Federal Reserve Governor Donald Kohn said Friday, cautioning that any disinflationary effect could reverse over time.

"The effects of globalization on domestic inflation need not even be negative, especially in today's environment of strong global growth," Kohn said in remarks prepared for delivery to a conference sponsored by the Boston Fed.

It looks like the BR view of official statistics understating inflation is starting to filter into the conventional wisdom, which means that, even if official statistics show inflation is low, that doesn't necessarily mean the Fed will stop raising rates.

The big question, is, if the Fed starts using "informal sources of information in addition to official data to determine the true extent of inflationary pressure" (quote from article), what sources are those going to be? Who gets to decide? What gets chosen and why?

Posted by: GRL | Jun 16, 2006 3:02:45 PM

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