Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Is it Smart To Sell In May? Maybe.

By Keith SchneiderStock MarketsMay 16, 2021 04:53AM ET
www.investing.com/analysis/is-it-smart-to-sell-in-may-maybe-200580389
Is it Smart To Sell In May? Maybe.
By Keith Schneider   |  May 16, 2021 04:53AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Last week we discussed that after new highs in the Dow and S&P, the NASDAQ 100 has been “stuck in first gear” and that the Fed is stuck between a “rock and a hard place.” 

We’re seeing 1970s’ style inflation being ushered in by easy money from Central Banks throughout the world.

Soft commodities got a bit ahead of themselves and were in a process of some mean reversion, but the metals market held up well because of geopolitical stress. Meanwhile, precious metals were strong while cryptocurrencies showed signs of a potential collapse under the same pressure, quite the divergence.

After two down days digesting this news, the “easy” money came roaring back into the market and the Dow, S&P 500 and even the NASDAQ rallied with a surge of buyers thinking the downdraft had ended (not likely). In fact, we issued a sell signal on Friday afternoon on one of our investment models.

Typically, May is not as good a month as April; the average return for the S&P during May, since 1950, is 0.17%, and positive 59.1% of the time (see chart below for actual record).

May is so uncertain that market pundits and students of history have coined the phrase, “sell in May and go away.” However, the warning now is that you may come back in late October or November and must buy back at higher prices.

In recent years, this sell in May sentiment has waned. A perfect example of this was last year, as May was a strong buying opportunity.

Also, the NASDAQ rallied daily to new heights and you would have been unhappy if you were under invested during May to November.

To put this into perspective, the chart below shows the different 6-month market periods:

Variious S&P 500 Index 6-Month Returns
Variious S&P 500 Index 6-Month Returns

This week’s highlights

  • DIA and SPY both Rejected 50-DMA, stayed above and regained their 10-DMA’s despite selling off for the week
  • QQQ and IWM both closed under 50-DMA into warning phases. IWM was oversold on both Real Motion as well as price. We will continue to monitor for confirmation of a bullish breakout over the 50-DMA
  • Despite the huge 2-day rally, all the key indices closed down between 1.0 - 2.4% for the week. NYSE Composite Index closed under its 50-DMA
  • SPY’s sharp 2-day rally helped it regain neutral ground on our Risk Gauge. However, the QQQ’s could not escape a sustained bearish reading
  • Value stocks are holding their outperformance vs. growth stocks
  • Real Motion is breaking down on the weekly charts for IWM and the QQQ’s as well
  • Volume on Friday was light, and the number of accumulation days over the last 2 weeks was showing a neutral, if not slightly negative reading
  • Consumer staples was the leading sector last week, showing a move to safety plays.
  • Weakest sector last week was semiconductors, confirming moves out of speculative plays into safer sectors
  • VXX and GDX led last week, indicating a transition into more defensive plays
  • Mean reversion is kicking in regarding soft commodities, while the bigger trend is still intact
  • GLD seemed to be gaining traction with geopolitical stress, as well as a high-pressure week for the cryptocurrency market which had been drawing buyers away from GLD. Look for Gold to break its 200-DMA soon with instability across other markets inviting investment into safer plays
  • 3 out of 6 members of Mish’s Modern Family are showing signs of weakness (Semiconductors, Biotech, Russell)
  • Regional Banks (KRE) went up with a rise in yields
  • USD has broken under its 10-wma and looks poised to take out multi-year lows going back to 2018
Is it Smart To Sell In May? Maybe.
 

Related Articles

Declan Fallon
Russell 2000 Set Up For Breakout By Declan Fallon - Jun 14, 2021 2

Friday didn't offer a whole lot for Large Caps or Tech Indices; volume was down and the net position for the indices was unchanged.  The NASDAQ was caught below internal base...

Is it Smart To Sell In May? Maybe.

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email