When it comes to the garden bed of US stocks, May has not been the month of flowers bull-ooming. On Friday May 27, in fact, both the S&P 500 and the Dow Jones Industrial Average ended their fourth consecutive week in the red.
And according to some mainstream experts, the market's upside growth has been choked off by one fundamental "weed" in particular: High prices at the petrol pumps. Here, the following May 28 Wall Street Journal has the story:
"May has proven a dismal month for stock investors. US economic growth has failed to come in as many had hoped, crimped in part by soaring oil prices. We started the year with a lot of momentum, but $4 gasoline is pretty hard to ignore."
So what's the one problem with this widely-held notion? Simply this: There is no consistent correlation between rising gas prices and falling stock values. But don't take my word for it. The chart below plots the monthly average of retail gasoline prices in the U.S. since 2008.
The green lines identify the two conspicuous flaws in the high gas/low stock theory. First: from May 2008 to December 2009, the US stock market endured a gut-wrenching sell off that cemented its worst year since the Great Depression. Retail gas prices were plunging at the same time.
Second, from its March 2009 bottom, US stock values have been on the up-and-up, right alongside rising gas prices.
In the end, the mainstream search for external "causes" to explain the market's trend is a dead-end street -- and there's no room to turn around in time to catch those changes before they've passed.
Elliott wave analysis, on the other hand, measures the internal factors that drive all financial trends. These include Elliott wave patterns, sentiment indicators, breadth, cycles, and more. And, in the May 27 Short Term Update, our analysts set the stage for all of these components with this opening insight:
"The S&P and DJIA have closed down for four straight weeks for the first time in two years (June 15-July 16, 2009). Then, the June-July 2009 decline was the first major pullback in the initial stages of" the rally up from March 2009.
Next, Short Term Update presents a powerful, three-year close-up of the DJIA vs. Momentum that reveals whether the underlying strength that supported the 2009 uptrend is present now.