Unconditional support continues…

The Federal Reserve’s incessant support of asset prices continues to propel stocks to all time highs. The S&P 500 (chart) closed out the month of April at a record high of 1597.57. For the month, the Dow Jones Industrial Average (chart) closed up 1.79%, the Nasdaq (chart) +1.88% and the small-cap Russell 2000 (chart) finished the month gaining about 1%. Records are being broken despite the lackluster job growth in our country, a weaker than expected GDP report issued last Friday, and a mixed bag of Q1 corporate earnings reports.

Not to sound like a broken record, but as long as the economy stays stuck in neutral, QE3 should remain in full effect, which is what I expect to hear when the Federal Reserve concludes their two day meeting this afternoon. This mantra should also continue to be bullish for stocks and act as a catalyst for support should we get the pullback or market correction that the bears have been chatting up all year long. To add even more fuel to the fire, you now have central banks from around the world opening up their balance sheets in further support of their own economies. I am not so sure that the old adage of “sell in May and go away” will apply this year just from the mere power and seemingly collaborative efforts of the world wide central bankers. Logically, this cannot continue to be the case, but for now it is super charging the markets.

Technically speaking and from a relative strength perspective, the four key indices are below the 70 value level of the RSI which is considered overbought territory, and therefore could very well be consolidating for the next leg up. Of course, the market is way overdue for some type of pullback. I have been expecting this for months now and whenever there is any type of selling pressure, it has been met with undeniable support. Best of luck in the month of May and remember it is typically a good idea to use protective stops in any position you enter into especially with the amazing double digit run stocks have had so far this year.

Have a great May 🙂