Most market observers have heard the old adage "Sell in May and Go Away". As with all statistical analysis you have to look deeper into the data and not take it at face value. While it is true the next 6-month stretch is the worst for the S&P going back to 1950 (1.59%) not all is negative. Five of the last six years saw a positive May through October posting an average gain of 4.8%. Also if you take into context where the long term trend of the S&P resides the data tells a different story. If the S&P is trading above the 10-month moving average, the May-Oct time frame still shows the weakest 6-month return however it boasts a gain of 2.45% and positive roughly 70% of the time. On the flip side, if the S&P is trading below the 10-month moving average the average loss is -2.04% and only up close to 50% of the time, which ranks second worst in performance only behind April-Sept.
Looking at May data:
- Last 20 years: May ranks 7th in monthly performance with an average gain of 0.05%
- Last 20 years: The average daily trend is trend-less swinging back and forth
- Last 20 years: May is the second least volatile month
- Since 1950: May ranks 8th in monthly performance with an average gain of 0.24%
- Since 1950: May is higher almost 60% of the time and ranks 8th in volatility
Given the state of the current environment featuring higher volatility and choppy waters we don't want to totally ignore the seasonality statistics. We are more concerned with the overall trend in the market. However, with the S&P barely above the 200 day coupled with a declining 50 day moving average we are willing to be patient in this market. If the S&P can rally and stay above an upward sloping 200 day moving average the old adage of sell in May and go away may prove worthless.
