May 1st, 2012
in Gary's blogging
Then again, maybe not. It all depends on how you read the tea-leaves. Interesting analysis on the theme “Sell In May And Go Away” by several analysis.
This article, Sell in May? by Barry Ritholtz consists of charts only but is a compelling analysis just the same. February, May and September have been the weakest months for market gains with September being the most drastic according to history. One commentator pointed out correctly that selling in May and not returning until September is the only way the old market adage works. Playing in between will serve mixed results often ending is losses trying to figure out the illusive swings.
Regardless what most think, there is a real danger out there called a Black Swan and it is out to get you. Here are some of my thoughts on this coming event.
In the article below, Mr. Holmes, thinks this adage is a bad strategy for this years investors. He believes this time around is different because the GDP is better this year than last year and the market gains for the first months is healthier than last year. I agree the numbers look better, but the future is a lot gloomier and vastly more unpredictable, especially at this juncture of data that screams CAUTION.
Sell In May And Go Away? Not This Year by Frank Holmes
“One catchy investing maxim that’s popular this time of year is “sell in May and go away,” the notion that investors should cash in their investments and take the summer off. Historically, this hasn’t been a bad strategy. You can see from this chart that June, July, August and September have been the worst four months of the year for the S&P 500 Index since 1988.”
Mr. McCurdy points out in his article below, the market is at one of the riskiest one percentile of all historical observations. While this is another analysis based on history, I would like to point out that lately the charts and other technical observations have been skewed radically to a point where no sane trader would bet on their validly alone.
Charts, historical data and tea-leaves were great measurement devices 3 years ago, but that notion has been thrown out the window of a 10 story building. Much of this transformation has been because of the low market volume, retail investors removing themselves from the market and plain old greed from market manipulation activities of DaBoyz.
Stock Market Risk Remains At Historic Extreme by Erik McCurdy
“The stock market now carries extreme risk from both long-term and short-term perspectives. The computer models that we use to generate our STS and our Cyclical Trend Score (CTS) analyze a large basket of fundamental, internal, technical and sentiment data, searching for highly likely inflection points in the secular and cyclical trends.
Based upon more than 80 years of data, stocks are now in the riskiest one percentile of all historical observations. Another violent retracement similar in character to the 2010 and 2011 declines is coming; it is simply a question of when."
I certainly agree that a correction of some magnitude is coming but it will probably be based on a Black Swan event yet to be clearly defined.
The current market events, the European financial issues and many other negative's out there should be a cautionary signal of significant portions. I would view any position being long needs to stay that way for at least a year. Swing trading is at your own risk and day trading just doesn't have the volume to calculate the risk/reward formula.
The sleepels are more than content to let their profits ride and for good reason. The markets are not doing badly at all as Mr. Holmes and the MSM would have you to believe. Unlike the market sheep, are you willing to gamble your fortunes with guesses and that drug called 'Hopium' every politician, broker and DaBoyz are handing out in large doses? The facts are out there and they do not paint an uplifting and picturesque state of the World Finances. A continuation of a 'happily ever after' stock market is not reality.
The market numbers at the end of 2007, just before the market decline in 2008, were based on pie in the sky, fictitious and overblown financial data in the housing sector. As we all witnessed, the housing bubble popped and the markets slide to 'realistic' levels appropriate for the time. This time around is isn't any different as these market numbers are way too high but will be 'fixed' in due time.
My aim is to jump in with some longs and play the hell out of daytime swings when we finally see the correction that is badly overdue.
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Written by Gary
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