Pisani: Here's the problem for stocks in May

Stocks are largely sideways in April, but bulls have several problems as we head into May:

1) Sell in May and go away: bad advice. There is a negative psychology associated with May around this hoary chestnut. I recently penned a piece for CNBC Pro on the problem with this whole catchphrase. Simply put, it's true the six-month period from May to October underperforms November to April over very long periods, but it is idiotic to withdraw money from the market for six months. Better to rotate into defensive names in the summer (they tend to outperform) and then back into the S&P 500 in the fall.

2) Markets are complacent and at risk of mild correction. The action in the last 24 hours indicates markets are getting too sleepy: the Volatility Index (VIX) is at its highest level in a month. Somewhat apocalyptic warnings of a "day of reckoning" from Carl Icahn and renewed central bank risk (from Japan's lack of action) are two immediate issues that have arisen.

Still, it seems unlikely we will have a major swoon like we had in January and February. That swoon was largely caused by worry about China melting down and a potential recession in the U.S. Both of these now look unlikely.

3) The big issue is valuation. The market is fully valued, with the big industrials I like to watch at 19 or 20 times 2016 earnings. The Street had been playing with full year earnings for the S&P 500 at roughly $123 earlier in the year; we are now down to $119 (17.3 times forward earnings) and likely heading toward $118, close to the $117.26 for 2015.

This is not a catalyst for a meltdown, but it is a very good reason why stocks are hitting resistance just shy of historic highs.

What we saw in April:

1) Dollar weakness continues, with the dollar index is at its lowest levels since August on some combination of a) belief that the Fed will hike at most once this year, and b) poor first-quarter economic stats.

2) the weak dollar is fueling a recovery in commodities. It's been a huge month for both precious and base metals:

Metals in April
Silver — up 15.9 percent
Nickel — up 11.9 percent
Aluminum — up 10.7 percent
Iron Ore — up 6.9 percent
Copper — up 4.8 percent

3) Oil is firming...oil is up nearly 20 percent this month, 70 percent from its February lows, and we are within earshot of $50.

4) Global equities are mixed for the month. Emerging markets and commodity-based economies are up modestly on the dollar weakness:

South Africa — up 4.9 percent
Vietnam — up 3.3 percent
Nigeria — up 3.1 percent
Emerging Markets ETF — up 0.3 percent

European equities: the Stoxx 600 is up better than 1 percent for the month, but the trend this week is down. Same with the U.S.: the S&P is flat for the month but down 1.4 percent this week.

5) Earnings: Roughly 60 percent through earnings season. After a rough week for earnings, the tone has been better in the last day and a half with strong showings from new tech like Amazon, Expedia, LinkedIn, Pandora, Expedia, and Facebook, that somewhat offset the poor showing from Microsoft, Apple, and Google.

The general trend on guidance is a better tone and reaffirming guidance. Many big Industrials that used terms like "cautious" in Q4 used terms like "stable" or "improving." Those big Industrials generally put up better than expected numbers. Guidance was mostly affirmed, there has been fewer instances of downward guidance. Banks were mostly better on slighly better loan growth, though net interest margins were mostly flat. The big question was Energy and whether Q1 was the trough earnings period. Exxon Mobil put up better than expected numbers and suggested that this is indeed a possibility.

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