Sell In May And Go Away – Truth or Myth?

There is a saying in the Stock Market,

“Sell in May and Go Away”

But is there any truth to it?

The phrase refers to the fact that the summer months from May to September tend to see much lower returns than the winter months from October through to April.

Let’s take a look at the last 7 years of data using the Dow Jones Industrial Average (DJ-30).  For this, we will use a weekly chart on a logarithmic scale.

Sell In May Go Away
Sell In May Go Away

Telechart Chart Courtesy of Worden Brothers Inc

On the chart I have plotted the periods from May to September inclusive.  Over the past 7 years, six years have seen either sideways or negative return.  (Marked with red boxes)  The only year that was an exception was 2009 (green box), the sharp recovery after the crash saw the stock market produce record gains whilst trying to cover from the previous year’s losses.

So in the most recent years, the theory held true most of the time.

However, was this true on a longer time-frame?  Here is an excerpt from the Liberated Stock Trader PRO Books and Training Course.

“We see that over the last 60 years the best months to be in the market were January, March, April, July, October, November, and December, those months having each attained on average of 0.5% or greater gain. 

Now, this is an average and there are of course years where these months will bring negative returns. 

We are dealing with probabilities, and I am sure this information will be very useful in your trading.”

But that was the last 60 years, what about the more recent decades?  From the years 2000 to 2009 the worst months to be in the market were January, February, June, and September.

So, the lesson here is, that over the last 12 years the market does not tend to have a good summer.

Interested in the best days of the week to trade?  Interested in the 4 year business cycle and when the worst years to invest are and when the best years are?  In the Liberated Stock Trader Book I show with an 86% probability that the 4-year business cycle is real and also when it is set to strike next.

 

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