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For all those who berated me in May about my reference to the adage ‘sell in May and go away’ maybe you want to give some credence to what has been a long-term habit of the market. And this year has been no different.
Simply put, the northern hemisphere tends to holiday from May to July and when we are on leave we don’t want to be bothered about things like the finance markets. Especially if you have blown your budget out of the water as many brokers, analysts and fundies have once again done. You take a break and work the market according to what presents itself when you return to your desk.
Because in OZ we are at times dependent on overseas money to drive our markets, we often do not have the upward momentum that has sent our market to new heights if that overseas flow dries up.
There are a number of pointers to pick up from the recent weakness but one glimpse at the OBV (on balance volume) tells the story.
click chart for more detail
Many of you may have noticed that in recent weeks our market has attempted to break though and has actually achieved records on certain days but has failed to hold gains by day’s end. This is a clear sign of weak buying.
Right now there is no rush to buy but I would not entirely turn my back on the market either. Every time you do it seems to take off.
The northern hemisphere holiday season will be over soon and yes we will see our market soar again.
Enjoy the ride!
Tom Scollon
Chief Analyst
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