I just read the May 2005 market commentary from John W. Henry & Co (PDF). (John W. Henry is a trend follower and owner of the Boston Red Sox.) It’s a good run-down of the current markets and well worth the read — and it’s short. 
Some parts that stood out to me (emphasis is mine):
Currency and Bond Markets do not Follow the Script
At the beginning of the year, most forecasters predicted further declines in the US dollar because of long-term imbalances that could only be cured through a price adjustment in the exchange rates. In fact, the trends in the fourth quarter of 2004 suggested that there were few who wanted to take the other side of these prognostications. In reality, a number of the fundamentals have turned in favor of the dollar and the political uncertainty in the European Union (EU) has resulted in less stability for European currency values. As this demonstrates, being wed to a specific point of view can be hazardous, because facts and numbers change, and so do trends.
Along with the disruptions in the EU Stability Pact this spring, which has made it ineffective and has added to fiscal uncertainty, there has been a clear signal that European integration should slow through the “No” votes on the EU constitution by both the French and Dutch. We will not try and be political analysts and make a prediction of what this means for the long-run in Europe, but it is clear that a lack of consensus on the meaning of the European Union will call into question the valuation of the currency, especially relative to the dollar. Talk of the euro as a new reserve currency may have gotten ahead of itself.
Stocks Still Looking for Direction
While there have been clear signals about the trends in currencies and interest rates, the same cannot be said for equity markets, which have been giving mixed signals. The S&P 500 has seen some recent trending upward, but has not been able to produce any new highs for the year. The European stock markets have been affected by the slowdown in growth and political uncertainty, albeit there has still been an increase in indices prices. Japanese stocks have only moved slightly higher for the month because of world growth prospects and uncertainty on the monetary actions of China. The result has been mixed for our models given the lack of clarity with the trends and the relatively large short-term reversals in the market.
Energy Markets Continue their Volatile Moves
The markets have been extremely sensitive to supply numbers and to any news about supply congestion. Any shutdown in refining capacity has led to large swings in product prices, especially unleaded gas, which is expected to be in tight supply during the summer driving season. This is a difficult market for longer-term trading, which does not react as fast to these quick changes in direction.
(via Michael Covel)
