There were plenty of warning signs heading into last week’s hard stock market selloff.
There was the precarious look of the financial sector… the historically low reading on the Volatility Index… and the endless stream of talking heads appearing on the financial networks urging investors to buy stocks.
The S&P 500 closed Friday at 1,816 – down about 4% from the all-time high it posted earlier this month.[ad#Google Adsense 336×280-IA]The index has given up all of its gains for the year.
And there’s a rapidly growing belief that the long-awaited correction is finally here.
But it isn’t… not yet, anyway.
And last week’s selloff has me looking to buy stocks this week.
Let me explain…
I haven’t changed my overall bearish tune for this year.
I still think the stock market is in the process of forming an important long-term top and will suffer a significant decline later this year and into 2015.
But this old bull market still has one more kick left in it. So I’m looking to buy stocks this week in anticipation of a rally going into the end of the month.
The back half of April is bullish. Stocks almost always rally during the final two weeks of the month.
It could be the general good feelings of the Easter season. Maybe it’s the relief investors feel after finally filing their taxes. Or maybe it’s the swarm of last-minute retirement-plan contributions hitting the market. Whatever the reason, it pays to be bullish during the second half of April.
The following table shows how the S&P 500 has performed in the second half of April over the past 10 years:
As you can see, in eight of the past 10 years, the stock market rallied in the second half of April. During the two years we didn’t get a rally, the loss averaged a mild -0.7%. And in the eight years we got a rally, the average gain was 3.3%.
If we get an average rally during the back half of April this year, it’ll be enough to pop the S&P 500 back up to the 1,880 level. And that’s a rally worth trading.
Don’t stick around too long, though. The old Wall Street adage “Sell in May and go away” is likely to hold true this year.
Best regards and good trading,
Source: The Growth Stock Wire