Quite a week one way or another.  The rally continued across the markets with the FTSE reaching the 4200 level. We are now in May which historically is a down month.  The UK has a holiday on Monday for May Day.

One of the things I keep track of is the difference between the Futures and the cash (index price).  In a normal market the futures trade at a premium (higher than the cash), but since the middle of October last year the futures have traded at a discount to the cash.  Until last October it was very unusual to trade at a discount, but since then the futures have been consistently lower.  The discount after Friday’s trading is 49.7 points, this just 6 weeks out from expiry, is large.  What does it mean?  Chances are the market will drop over the next 6 weeks, and it confirms in my mind that this rally is a bear market rally and should not be looked at as the start of a new long term rally.

The news from the US during the week was not good but was disregarded by the market.  Three more banks failed, bringing the total this year to 32 and 57 since the credit crunch began last year.  Then of course we have Chrysler going into chapter 11.  Much has been said that this will be a quick 60 day chapter 11.  Want to bet? 

Initial unemployed showed a slight improvement but it is still over 600,000.  Car sales are way down.  So I’ll wait and see if “Sell in May and go away” is a self fulfilling prophecy.