This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Are You Ready for a June Swoon?

NEW YORK ( TheStreet) -- After a positive month, bulls are thumbing their noses at the "sell in May and go away" crowd. But just ahead lies the potential for some serious gloom and doom in June.

Here's what to watch for as we head into the crazy, hazy, lazy days of summer.

A cluster of Hindenburg Omens: Named after the famous crash of the Zeppelin Hindenburg, the Hindenburg Omen is designed to warn of potential serious declines in the stock market. We've had two now in the last six weeks, with the first one coming on April 15 and the current one on May 29. The more that cluster, the more accurate the indicator tends to be.

The Omen is made up of a number of factors, including breadth indicators, moving averages and the McClellan Oscillator, and Hindenburg specialists note that the last confirmed occurrence was logged in October 2007. It correctly predicted market swoons in 1987 and 2008, but skeptics point out that it has only a 25% long-term accuracy rate.

Economic and market disconnects: Economic fundamentals and stock market action have been on a diverging course since the recent rally started in April. Across the board, economic fundamentals have weakened while the major U.S. indexes were setting record highs on nearly a daily basis.

Europe is clearly in recession, China is slowing, U.S. consumer spending and incomes are stalling and major commodity markets like copper, lumber and gold all point to a global slowdown. Volatility in Japanese financial markets has gone parabolic and regardless of Federal Reserve easy-money policy, markets cannot ignore economic fundamentals forever. As these disconnects grow, it becomes increasingly unlikely the United States equity market can continue marching higher on a solo path and totally out of synch with the rest of the world.

U.S. corporate health: The PC market continues to languish. Wal-Mart's (WMT) results point to a stressed consumer, and in a little-reported event last Wednesday, Moody's downgraded Alcoa (AA) to junk status. Alcoa's credit is now Ba1 with a stable outlook, which is significant because Alcoa is a member of the Dow Jones Industrial Average and widely seen as an economic bellwether in its position as a major global aluminum supplier.

A slowdown in demand for aluminum is viewed as a precursor for slowing economic activity, much like copper and lumber, and so weakness here confirms other indications of the slowing worldwide economy. Alcoa typically kicks off earnings season, and so its next report in early July could be interesting and will be carefully scrutinized for signs of weakness in the macro economy.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%
YHOO $36.58 -1.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs