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Stocks- Sell in May and Go Away?

News_Letter / Global Stock Markets May 11, 2008 - 07:48 PM GMT

By: NewsLetter

News_Letter

Dear Subscriber,

This weeks newsletter looks at the stock markets trend during the summer months and especially in light of the "Sell in May and Go Away" adage. Meaning to sell stocks during May with a view to buying them back again some time during September.


The Market Oracle Newsletter
May 4th , 2008            Issue #13 Vol. 2

Stocks- Sell in May and Go Away?


Dear Subscriber,

This weeks newsletter looks at the stock markets trend during the summer months and especially in light of the "Sell in May and Go Away" adage. Meaning to sell stocks during May with a view to buying them back again some time during September.

On a purely statistical basis the sell in May rule does not stand up as 60% of the time stocks can be expected to rise between May and the start of September, therefore if such a rule is to work it would need significant refinement.

Presently, the stock market rallies have continued into the start of May on the back of better than expected earnings reports despite rising inflation as evidenced by surging energy and food prices and a slowing economies.

A key element required for the rule of selling in May to work would be to take into account the prevailing trend going into May, i.e. the best trend to sell from a technical viewpoint would be a rally from March to May within a bear market, which does appear to be matching our current state of play as the stock markets have yet to fully discount a US recession which will impact economies across the globe and thus corporate earnings.

Despite the most recent rally, the last 6 months have been bearish when statistically they were supposed to be the best six months of the year, leaving many stock indices lower by between 10% and 25%. This on face value would suggest that stocks should be be stronger during the summer months in light of weakness during the previous six months. However analysis of actual performance suggests that a weak November to April is followed by a weak summer.

Thus two negatives for stocks that seem to support "Sell in May and go away" for this year.

The following articles further analyse the prospective stock market summer trend on an seasonal basis and shed more light on 'Sell in May and go away' for 2008.

This weeks FREE Special is on How To Trade Currencies Using Elliott Wave Theory. This course includes a 20 minute video and report.

Your corporate earnings watching analyst,

Nadeem Walayat,
Editor of The Market Oracle

In This Issue
  1. Stock Market Strategy- Sell in May and Go Away: Fact or Fallacy?
  2. Bearish Stock Market Wedge Patterns- Yorba TV Show
  3. A Good Reason To Sell Stock Market Investments- Taxes
  4. Stock Markets Headed Lower into June-Sell in May and Go Away
  5. Worst is Not Over for Stock Market Falls, Credit Crisis Or Fed Rate Cuts
  6. Why the Credit Crisis is Far From Finished
  7. Institutional Index Stocks Index Suggests Weakness Ahead for Broader Market
  8. Worst of the Credit Crisis May be over as Investors Switch from Bonds to Equities on Inflation Concerns - Part 1
  9. Powerful Stocks Bull Market As US Hyper Power Prepares for Global Hegemony
  10. How to Survive a Recession and Make Profits
1. Stock Market Strategy- Sell in May and Go Away: Fact or Fallacy?

By: Prieur_du_Plessis

“Where is the stock market heading?” is one of the questions most often asked by investors, especially as stock markets seem to be disconnected from economic activity.

Read Article

2. Bearish Stock Market Wedge Patterns- Yorba TV Show

By: Anthony_Cherniawski

Today I want to talk about wedges (not wedgies).  Especially the bearish kind of wedge.  We have them in a lot of indexes, namely in the SPX, the NDX and the EEM.  Bearish wedges are continuation patterns of an existing trend. A wedges is formed by a counter-trend correction and it leans against the prevailing advance or decline.  In this case, a rising wedge is bearish and a falling wedge is bullish.  The wedge pattern usually retraces one-half to two-thirds of the prevailing move before failing or reversing.  Volume usually contracts during the formation of the wedge, while increasing after the break down or breakout.  My source is John Murphy's book, Technical Analysis of the Futures Markets.

Read Article

3. A Good Reason To Sell Stock Market Investments- Taxes

By: Paul_Lamont

Last month we stated: “we should expect rocket-launched (oh they've saved us) bear market rallies.” Since that time, the DJIA has had two separate blastoffs. That's all it took for investors to forget about the massive deflation that is happening in U.S. neighborhoods . We view the rise of the last two months as a breather before more serious selling takes hold. Goldman Sachs agrees and is warning ‘delusional' investors of a sell-off of “a further 15pc over the ‘near term.'” Warren Buffett has also recently stated “ the recession will be more severe than most expect. ”

Read Article

4. Stock Markets Headed Lower into June-Sell in May and Go Away

By: Donald_W_Dony

The old stock trader's saying of “sell in May and walk away” appears to be unfolding right on schedule this year. And with the expected major low coming in June, for the next 2 months, investors may wish to sit on the sidelines to watch the show and keep their investing on hold. If the last three major lows (March 2007, August 2007 and January 2008) were any example, the trough in June could be quite interesting. No one can say that this market is boring.

Read Article

5. Worst is Not Over for Stock Market Falls, Credit Crisis Or Fed Rate Cuts

By: Ashraf_Laidi

Commentators and pundits alike have erroneously stated that last week's highs in US equity indices broke important technical levels. The Dow has not only failed to breach above a key trend line resistance of 12,920, prevailing since the October highs but also failed to breach the 50% retracement from the same high to the January lows. Similarly, the S&P500's major resistance stands at the 1,410 trend line resistance acting since the October 10 highs. We remind our readers that these recurring failures are no coincidence but instead a technical failure that is largely in synch with prolonged economic uncertainty.

Read Article

6. Why the Credit Crisis is Far From Finished

By: John_Mauldin

This week in Outside the Box we look at two brief essays which give us different perspective on the Continuing Crisis. The first is by Mohamed El-Erian, the co-chief executive and co-chief investment officer of Pimco. His book, 'When Markets Collide: Investment Strategies for the Age of Global Economic Change', will be published by McGraw Hill in June, and it will be on my summer reading list. El-Erian argues in the thought-provoking piece from the Financial Times that the crisis is still far from finished, and that those who think we are returning to more placid times may be surprised when volatility suddenly becomes even more pervasive.

Read Article

7. Institutional Index Stocks Index Suggests Weakness Ahead for Broader Market

By: Marty_Chenard

This long term view of the Dow, Transports, and Institutional Index tells you where the market is now.

Bull and Bear markets have one thing in common ... Bull markets move up in a long term up channel, and Bear markets move down in a long term down channel.

Read Article

8. Worst of the Credit Crisis May be over as Investors Switch from Bonds to Equities on Inflation Concerns - Part 1

By: Prieur_du_Plessis

The last week was characterized by investors increasingly taking the view that the worst of the credit crisis was over. They seemed to be shrugging off further substantiation of the dreadful state of the US housing situation, as they digested the latest round of quarterly earnings reports. The latter ranged from plunging profits from Bank of America (ANC) to a dreadful report from Ambac (ABC) to guidance from Microsoft (MSFT) that failed to live up to investors' expectations.

Read Article

9. Powerful Stocks Bull Market As US Hyper Power Prepares for Global Hegemony

By: Clive_Maund

Back in the late 20th century there were predictions that the 21st century would be characterized by “resource wars” where fighting breaks out between countries and aligned groups of countries, as they scramble to secure increasingly scarce commodities for themselves, principally oil and water. Barely had we entered the new century when a major resource war began, with the big surprise being that it was not some banana republic suddenly deciding to invade and loot its neighbor's territory, but instead the most powerful country on earth muscling its way around an entire region on the other side of the planet in order to position itself to plunder its oil resources en masse for itself.

Read Article

10. How to Survive a Recession and Make Profits

By: Nadeem_Walayat

Despite frantic efforts by the US Government and central bank to avoid a recession during a Presidential election year, the US is heading for a protracted recessionary period that is expected to be worse than the last two recessions as the credit crisis and housing bust continue.

Read Article

 

For more indepth analysis on the financial markets make sure to visit the Market Oracle on a regular basis.

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