The S&P 500 index closed yesterday exactly where it closed 6 months ago.  The old saying “sell in May and go away” has played out quite well, and it has even extended the “go away” part for an additional six months, since the index is down over the past 52 weeks. 

The market has been range bound for quite a while now.  Ever since the beginning of the credit market problems last October, we have seen the Dow fluctuate between 11,800 and 12,700. There are many factors that have contributed to this, but the bottom line is the uncertainty of what the next day will bring.  When there is uncertainty in the market, traders and institutional managers are unwilling to commit the funds held on the sidelines.  That is why there is a record amount of capital sitting in cash at this time.

The factors causing the uncertainty are plain to see: oil prices, the weak dollar, interest rates, inflation, recession fears, and certainly, the elections coming up.  Add to this the declining housing market, and you have a stock market frozen like a deer in the headlights.