Sell in May and go away (can be read with graphics at http://ift.tt/2pVsnDR) May 8, 2017 by Keith Richards Brooke Thackray put out an interesting report (click here) on the health of the stock market. It’s worth reading. His basic premises is that this year there is an even greater potential for a weak summer (i.e. the “worst six months”). Today, I’ve posted a chart, courtesy of www.stockcharts.com, for the DJIA’s monthly seasonal patterns since 2000 (tech bubble). As you will note, May can be one of the weaker months, with only about half of all May’s being positive (56% of May’s since 2000). June is the more concerning month, given its performance since 2000. Only 29% of all June’s have been positive since that year – which puts it ahead of September for the “Most likely month to fail” award. It’s probably worth noting that, despite the greater number of June failures, those poor performing Junes are on average not as bad as the poor performing Septembers. So it’s an arithmetic (i.e. the average number of poor month’s) problem that June faces, not a geometric (i.e. the extent of the pullbacks, if one occurs) problem. September tends to contain some of the bigger market meltdowns on a percentage basis – despite having less of them.
Thackray’s 2017 Guide tells us that since 1950, the average return for June has been 0.0% to 2016. Meanwhile the average September’s return was -0.5% since 1950. Mathematically inclined readers will see that September’s bigger pullbacks offset the fact that there are less of them than in June. Whatever the case, this study suggests a greater probability of weakness in June – even if its typically not an aggressive pullback. We’re up to 28% cash in the ValueTrend Equity Platform at this time. I’d expect to be selling more equities in the coming days and weeks.
submitted by /u/Seeker1975
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May 09, 2017 at 05:45AM
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