Sell in May and Go Away? Maybe Not

Sell in May and go away? Maybe...maybe not. Two things might affect that old saw:

1) prospects for QE3 are definitely back on the table. You think not? How do you explain the market dropping on Wednesday when the Fed released a reasonably upbeat economic forecast, then rose when Mr. Bernanke, during the press conference, clearly signalled the Fed stood ready to do more if there was a need to do so?

And stocks rose yesterday despite disappointing jobless claims and several high-profile earnings misses.

And did you see the way gold spiked this morning (Friday), as soon as the disappointing GDP figures came out at 8:30am ET? Went up $10 in a few minutes, following big gains yesterday.

2) real estate is back. When you see "Bidding wars" emblazoned on the front page of the WSJ, you know real estate is back. When you see big players among home builders and Real Estate Investment Trusts (REITs) hitting new highs, you know real estate is back.

Can there still be a summer freak-out over Europe? Sure there can, and there likely will be. Particularly if Europe makes no progress on the "structural reforms" that Italian Prime Minister called for today (see my prior note).

But don't kid yourself. Mr. Draghi at the ECB will resist as long as he can, but in the end if the bratwurst hits the fan, he will pull the trigger and do another round of LTRO.

And once the dust settles on the European elections, you will hear calls for raising money. By raising taxes. And not just on the wealthy. You will hear about the financial transaction tax again, and you will hear about Eurobonds too.

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