The S&P 500 eked out a tiny gain in May as investors watched for the latest debt ceiling headlines. May 17 and 18th proved pivotal days, at least to me, as the S&P negated a possible "diamond top" and launched a high volume, large percentage price increase over the course of two days. The old adage, "Trade what you see, not what you think," comes to mind. Portfolio allocation changes were demanded after those two days. While the financial media was ripe with those calling for a debt ceiling-fueled collapse, or at least a recession, the action in stocks has now changed considerably over the last few weeks. As mentioned above, I believe investors are currently "migrating" to the idea that the bottom was struck last fall and they need to get invested again. Still, despite the S&P 500's 20% rally from those fall lows more than 25% of its components are still mired in bearish trends. The always useful Sentimentrader.com notes the last two times this happened were 2001 and 2008. What am I saying here? Beware the "All Clear Echo." This rally may go on a few more months but I still find the October 2022 low suspect. Stocks are moving higher now, and portfolio allocations have been changing, but the jury is still out on whether this move will be lasting.
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