May: Will selling take hold?

May 2, 2018 11:00 AM
U.S. economic data & select global influences

A year ago, we had pointed out that despite May’s reputation as being a time to sell equities, the prior four years produced positive returns in all three equity indexes in May. Make that five years in a row now. Though, when you take a closer look at recent equity performance in May, each year there has been some volatility in the markets during May and the overall gains have been only marginal.  The question appears to be — as has been the case throughout the current bull market — will the initial selling take hold?” 

The broader implication of the “Sell in May and go away,” strategy is not necessarily expectations of a spring market crash, but the signaling of a traditionally weaker six-month period in equities. So perhaps traders should not be looking to spot weakness, but hoping for strength where they can find a level to take a percentage of their portfolio off of the table heading into the weaker performance period. The three worst months for both the S&P 500 and Dow Jones Indexes are June, August and September (not in that order) so May is a good time to grab some profits and take a breather from the market.   

About the Author

Editor-in-Chief of Modern Trader, Daniel Collins is a 25-year veteran of the futures industry having worked on the trading floors of both the Chicago Board of Trade and Chicago Mercantile Exchange.