We've all heard the saying, "Sell in May and Go Away." This describes a phenomena that implies that investors, in preparation for summer, will sell in May and then take a break from the market over the summer. If only it were that easy!
2020 was certainly an atypical stock market year, given COVID and the fact that there wasn't anywhere to "go away" to. However, I still think the concept is interesting. Last May, investors did not sell; in fact, they bought hand over fist. We did see some decline and difficulty in June.
DecisionPoint tracks six-month seasonality, and we are now entering a period of unfavorable seasonality. Typically, between May 1st and November 1st, the market experiences doldrums and finishes either lower or unchanged. That clearly occurred in 2020. The market finished the period of unfavorable seasonality slightly higher than where it was at the beginning of May. It then finished the period of favorable seasonality much higher.
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I love to create charts, so I decided to look at the various periods of favorable and unfavorable seasonality over the past three years. It's clearly not a "lock," but I suppose there is some truth to it.
CONCLUSION: We are entering a period of unfavorable seasonality next month. While a market pullback about now would be amazingly accurate, seasonality doesn't guarantee a certain outcome.
Greg Schnell, CMT, MFTA
Monday, May 3rd DP Trading Room at Noon ET!
I'm please to announce that Greg Schnell will be "in the house" on Monday at Noon ET! I can't wait to hear what Greg has to say about the market, but also his take on commodities and an intro to his trading style. Click here to register now!
Click here to register in advance for the recurring free DecisionPoint Trading Room! Recordings are available!
Happy Charting! - Erin Swenlin
Technical Analysis is a windsock, not a crystal ball.
Helpful DecisionPoint Links:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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