Where's the Next Support?

By David Brown, Chief Market Strategist, Sabrient Systems

We have all heard the old Wall Street adage to “sell in May and go away” until October, as the market historically underperforms in the May-September timeframe. And indeed, after the “bin Laden gap up” at the open on Monday, stocks quickly turned tail. Today, the selling intensified following the disappointing ISM Non-Manufacturing Index for April, with Energy and Materials the hardest hit.

In my weekend analysis, I talked about the possibility of a bullish reverse head-and-shoulders formation for the stock market. And after allowing for a brief panic on Monday, the market has been quite strong this week and appears to be confirming the bullish pattern.

Here in Santa Barbara, where Sabrient is headquartered, "June Gloom" is that time of year when the marine layer and murky fog last until about noon every day before the sun finally burns its way through. The market seems to be enveloped in a similar gloom, and at this point we don't know when the sun might come out to chase it away.