Bit far fetched, but many indicators come into one play of forming a top in May. Point by point 1) After edging up on the sale support as before after making a new high, Nasdaq composite gives room for a head and shoulders formation. Top would be in May if this holds true. 2) RSI, Stoch and MACDcan all be traced with following the patterns to top in may should all go up from now. 3) Halloween Indicator or sell in May and go Away - Since the Dow Jones Industrial Average was created in 1896, the market has produced a 5.2% annualized return during the winter months and 1.7% in the summer. With the 2 points above this would fit the bias that has actually materialized many times. 4) How you start a year, is how it will end up. January was not the best month, and some are already biased that 2014 will be shaky. 5) With this it is a mid election year like 2011, so people may give room for a similar dive as in 2011. In 2011 it also had a possible head and shoulders, from top of the head to neckline 10%, then another 10% down from the neckline. Totaling ~20% and also in summer.
Although some say that the outlook is better for the S&P 500, other suppose that a round of new highs for that index combined with a stall by the Nasdaq and the Russell would make for a “bearish divergence,” pointing to a pullback or consolidation in the near-term. We have already seen a 10% pull back from the 4400 area, meaning should the top materialize in may, and scare traders to follow the head and shoulders, should it be not canceled it will take it down 10% more in summer. And given the run-up in 2013, investors are more cautious in 2014.
No one wants to see a crash, but many are even waiting for a correction to get in. With many indicators forming ground for a pullback, bears may take advantage, while bulls will take profits early. Maybe even before may.
finance.yahoo.com/blogs/talking-numbers/why-the-nasdaq-could-be-setting-up-for-a-big-decline-210402381.html