Good Morning. The question I was asked most frequently yesterday was, can it continue? No, I'm not talking about the string of glorious, summer-like days with temperatures in the 80's (btw, that streak was obliterated in Denver yesterday as shorts and t-shirts were replaced with underlayers, fleece, and white stuff falling out of the sky) or Lindsey Vonn's dominance on the women's world cup. No, everyone wanted to know if the bulls' impressive start to the new year could be expected to continue ad infinitum.
Given that the S&P put up a 12-spot in the first quarter, a return that exceeded most analysts' estimates of the S&P's return for all of 2012, one couldn't be blamed for (a) marveling at the dramatic turnaround in stocks, (b) remembering that trees don't grow to the sky, and/or (c) thinking that the something's gotta give at some point here. I mean, seriously, as the bears are fond of saying lately, enough is enough already.
And yet, even after a REALLY crummy batch of PMI's from across the pond and some differences of opinion regarding the state of the Chinese economy (the official Chinese PMI came in at 53.1, which is a good, expansionary number and above expectations, whereas HSBS's version of the PMI was 48.3, which, of course, suggests a contraction going forward), our stock market managed to put away any and all negative thoughts, and start Q2 off on the right foot. Well, okay, I guess I should admit that the better-than-expected ISM Manufacturing report in the U.S. certainly didn't hurt the bull camp's cause.
But getting to the question at hand this morning, can the bulls' impressive joyride to the upside continue? First and foremost, as I wrote yesterday, it is vital to remember that Ms. Market can do anything she darn well pleases for as long as she pleases. After all, there is a reason that many believe the stock market will do whatever it can to confuse the masses.
Now that we've got that important disclaimer out of the way, let's go to the videotape and see what we can learn about the way the market has acted in the past when Q1 has been a rip roaring good time. But first, let's keep in mind that since 1928, the S&P 500 has been up in the month of April more than 60% of the time and that the average gain for the month has been 1.35%.