StockTouch Blog

Sell in May and Go AWAY

May 3, 2012 by Peter

So you may have heard the traders colloquialism “sell in may, and go away” but is there any rhyme or reason as to why. Well to find out i picked up the Stock Trader’s Almanac to figure out exactly what goes on in May and if these traders superstitions actually had any merit. They cite the month of May as the beginning of the
“disaster area” for equities:

◆ “May/June disaster area” between 1965 and 1984 with S&P down 15 out of 20 Mays

◆ Between 1985 and 1997 May was the best month, with 13 straight gains, gaining 3.3% per year on average, up 7, down 5 since

◆ Worst six months of the year begin with May

◆ A $10,000 investment compounded to $527,388 for November to April in 60 years compared to a $474 loss for May to October

◆ Dow Memorial Day week record: up 12 years in a row (1984-1995), down seven of the last 14 years

◆ Since 1951 pre-presidential election year Mays rank poorly, #10 Dow & S&P and #8 NASDAQ

Knowing what the data says, and that traders are some of the most superstitious people out there its actually rather scary to look at the above data. So perhaps this one time we can go against our statistics teachers better judgment and assume correlation might really be the causes here.

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