Sell in May, Go Away a Bad Play This Year

Sell in May, Go Away a Bad Play This Year

Sell in May, Go Away a Bad Play This Year


The data shows that the S&P 500 has delivered a total return, including reinvested dividends, of 10.8% over the last 6 months, essentially capturing all of the average rolling 12-month total return on the index since Y 1990.

The Big Q: Why not cash in?

The Big A: Some American fund investors have withdrawn more than $17-B from US stocks this May, with some $10.1-B in withdrawals last week alone, the 2nd biggest outflow this year so far.

But running against that tide, hearty investors are betting against that and have advocated the Buy-in-May approach this year, and sell in November.

Stocks may have priced in hope for a Trump policy stimulus this year, and are looking to a growing economy in the US and globally to boost Bullishness.

The Sell-in-May strategy is premised on the historic outperformance of the November-May period over the other 6 months of the year.

In the last 20 years, a $100 investment in the S&P from November through April would have become $343 while a $100 investment in May through October in the same years would have slipped to $98.5, according to the historical data.

From Y’s 1928 to 2017 the $100 would have become $4,270 from November through April but would only be worth $257 from investing from May through October.

In the Summer months things slow down so participants tend to see the chances for a pickup in volatility. That’s usually accompanied by weakness in the market. That has not happened this year.

Notably, the small cap Russell 2000 index has risen just 1.8% YTD, compared with 7.8% for the S&P 500, 6.6% for the DJIA, and 15.3% for the NAS Comp.

To get to a sell mode we would need a Fed that’s more Hawkish than expected mixed with economic data that’s weaker than expected. That combination could give us a domestic stock sell off this Summer. Last week markets discounted that scenario after the Fed mins were published, expecting the FOMC will stay Dovish this Summer.

HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.39) Neutral (0.23) Bullish (0.42) Very Bullish (0.51)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.35) Bullish (0.44) Bullish (0.29) Bullish (0.33)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.46) Bullish (0.48) Bullish (0.31) Very Bullish (0.58)
HeffX-LTN Analysis for GLD: Overall Short Intermediate Long
Bullish (0.25) Bullish (0.25) Bullish (0.29) Neutral (0.22)
HeffX-LTN Analysis for VXXL Overall Short Intermediate Long
Bearish (-0.41) Bearish (-0.44) Bearish (-0.42) Bearish (-0.38)

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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