Sell in May and Go Away

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• published: 27 Jun 2015
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http://profitabletradingtips.com/profitable-trading-tips/sell-in-may-and-go-away Sell in May and Go Away By www.ProfitableTradingTips.com Stock market trading volume has fallen dramatically. Is it that traders are following the old adage, sell in May and go away? Investopedia defines this term. [Sell in May and go away is a] well-known trading adage that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets. The "sell in May and go away" strategy is that an investor who sells his or her stock holdings in May and gets back into the equity market in November - thereby avoiding the typically volatile May - October period - would be much better off than an investor who stays in equities throughout the year. Historically the summer is a quieter time in the market than the fall, winter and spring. Not in a Rush to Go Anywhere The Wall Street Journal reports on the lowest volume in months in the market. Stocks also are in no rush to go anywhere. The Dow Jones Industrial Average has traded in a very narrow range so far this week. Not only have they failed to rise or fall more than 0.15%, something that hasn’t happened since 2006, the index has been unable to move in a triple-digit range for four straight sessions. Today the Dow industrials are on track to end a whopping 0.02% higher. The slow crawl leading up to Memorial Day is a tradition for markets. The week leading up to Memorial Day last year also posted the slowest trading volumes since the first week of the year (with 5.13 billion shares changing hands), and the four-day week following didn’t provide much of a pickup (5.47 billion shares were traded). And don’t expect volumes to pick up anytime soon. If last year is any indication, this is the new normal for the rest of summer. In 2014, from the week leading up to Memorial Day to the week of Labor Day the weekly number of shares changing hands was 5.44 billion, well below the weekly average of 6.27 billion for all of 2014. The Journals take is that this is just a seasonal matter. Another issue this year is that the market may have peaked and is perhaps set for a correction. Signs of a Correction The market has resumed its climb this year even as growth has slowed. Forbes writes about the possibility of a stock market correction. While predictions of upside or downside breakouts continue, there has been little meat behind them - until now. Four concerns are rising in significance enough to be taken seriously. Without a robust uptrend to counter them, these issues could trigger a market correction. The four concerns cited are these: • Weak growth • Mixed performance of individual stocks • Interest rate worries • Dow Theory (Transportation average has corrected) If you abide by the theory that stocks are stagnant in the summer you may sell or simply hold and go on vacation until the fall. But, if you are concerned about the Dow transportation average already correcting and a general weakening of the economy you will sell in May and go away until the correction has happened and then use your stockpiled cash to pick up bargains. http://youtu.be/zN0OyNz_szE