Tuesday, May 03, 2011

Sell In May & Go Away



History repeats itself for a reason, because they do, people never learn and they keep repeating their actions and decisions time in time out. This is the same posting I did 5 years back in May 2006, and repeated this in May 2008, and I should also repost this for May 2011. Personally, I don't think this May will be a down period, maybe June - July.


There is a familiar saying in capital markets "Sell in May and go away", made popular by author Jeffrey Hirsch who publishes the Stock Trader's Almanac. As I have argued before, in an average 12 months, you'd be lucky to have two periods of bullish phases, each lasting 3-6 weeks. The rest of the time will be punctuated by false rallies and bear traps, or just plain inactivity.

This is closer to the truth than most would want to admit. A broker would never say that to their clients, and most financial markets' employees would not voice that to their bosses.
It doesn't help that most of the major corrections have taken place between May and October.

A factor which has not been cited for the May-October effect is bonuses/holidays. In order to put in the good figures for year end purposes, there has always been a covergence of interests for players involved to have a solid last quarter so that bonuses in the new year will be good. Plus, you have extended holidays with the last 2 weeks of December and the first week of January - hence you need the cash and peace of mind to have some fun. Generally nothing untoward will happen during end-December / early-January because of that.... a kind of financial detente.
The festivity effect cannot and should not be under-rated. While it sounds naive but it happens. More good things happen when people are happy. Not just holidays, it could include important sporting achievements as well. May-October is also marked by a lack of holidays for all to look forward to - maybe we need to schedule more holidays into this period to effect a change in trend?!!

To sell in May and return after October is a good rule of the thumb, especially for "long only" players. In a revealing study: an investor who placed US$10,000 in the Dow average at the end of April each year since 1950 and sold at the end of October would have a net loss of US$272, while someone doing the opposite would have gained an astounding US$534,323. So, taking May-October off may not be just a good for your health but also saves you a lot of stress, plus improves your job performance smartly.
This seasonal effect has more things going for it in developed markets such as the US, but not for the developing markets. Those who are more hard working would seek out gains in alternative markets during the lean May-October period. The May-October effect is there because it is a reflection of the nature of an equity market. You just do not have sufficient liquidity and market velocity to keep going the whole year round, or even 6-8 months.

p/s photos: Tiffany Lee Lung Yee




30 comments:

Aman said...

Lately, you have posted too much of indecent pictures of beautiful women in you blog. I am one of your fan who open your blog almost daily. I could not continue following your blog if the picture of that nature is continuing- so distractful.
I am hoping you could replace the subject of your picture to be more decent and watchable one. tq

Salvatore_Dali said...

aman,

ty for voicing yr wishes... unfortunately that is not going to happen... if its distracting , maybe u should visit another site, apologies

however, if u r willing to pony up RM10,000 a year, I will follow yr wishes...seriously

Aman said...

Dear Salvatore_dali,
Tq.

1) I wish I could have that much of money.
2) Well, it is not really my personal wish, I am sure some others also not feeling comfortable focusing on reading your lines while passing thru such distraction.
3) I love your blog, I am not going away, But i have to do little magic to make it disappear-
4) May Allah show you the way (other way to get the RM10,000).

Salvatore_Dali said...

aman,

no worries, just kidding... as many there are ppl who find the photos distracting, there are even more who find them fun and pretty ... open minds, open hearts ... all i can say is i draw the line at x-rated pictures... we have to appreciate that we all come from different religious backgrounds n we have to respect that ...

as a blog is a private space, it hence reflects my values, i hope that is ok with you, you are very much welcomed to my blog site anytime, cheers..

Roden said...

Dali,

I am enjoying read your blog and enjoying the pictures you posted. It is not easy to find the right pictures, not too explicit, not too conservative, the beauty would only be seen when the right vital statistic and posture been shown. I believe most of the viewer enjoy your pictures also. Keep go on! Cheers!

amethyst213 said...

halo...been reading ur blog for long..

must say quite astonishing that ALL comments in this post is about the pictures...

about the May thingy, would it also because the doctrine is so entrenched that people had this subconsciously, avoiding the market at this period, causing demand to slow and market to down?

anyway, i love those pictures...

Kevin Leong said...

I ad hoc see your blog.. But today after reverify your blog comment supprising you give WRONG information.... login into http://moneycentral.msn.com as you can see the historical chart to last 10 years. Just take 2007, May07 is the up-rising of Dow Ind and peak at Oct07 ... So your assumption WRONG....!

Kevin Leong said...

good picture... as long not totally nude, I believe is ok

solomon said...

Sometimes, too much suppresion to oneself will not be good. The same goes to the market, the more you suppress it, the more it will rebound one day.

Respectfully to others, the pictures are of no harm. It is the person mind /act that are harmful. My suggestion is one could filter out the photo for Version 2 of the site. This is made possible with certain settings in PCs. The keyword is made use of the innovation. But, I like the frankness of voicing out.

On the market, like the unpredictable weather nowadays, it may take the opposite to the tradition market of sell in May and go away. I think it will be good month ahead.

stormillionaire said...

@ aman

LOL. I've been a little uncomfortable opening Dali's blog too especially during lunch break at work.

I keep coming back here because the content's good. Keep it up, Dali. :)

There is however a remedy for you to keep viewing Dali's postings and not be distracted.

If you're on Mozilla Firefox, simply go to "Tools">"Content" and untick the "Load Images Automatically". Voila. Problem solved.

Hope that helps.

CMIsian said...

When you say,"This seasonal effect has more things going for it in developed markets such as the US, but not for the developing markets.", do you mean there is less effect on Malaysia? or totally minimal?

Salvatore_Dali said...

http://bespokeinvest.typepad.com/bespoke/2009/04/sell-in-may-go-away.html

kevin,

the thesis is over 20 years... why cite just one year????

ccdev said...

hey aman,

indecent is a subjective term, y'know? And truth be told,if you were decent minded and your eyes are set on Allah, these pics wont affect you at all but because satan has his set his claws in you, that's why you find the pics to be an uncontrollable distraction ie your dick is getting itchy. You sound like those middle eastern arseholes who force their women to cover-up just so the men wont get a hard-on walking about. Try praying a bit harder and if praying dont help, you can try using your hand.

Leno said...

Buy Analabs at below 90 sen and Leader Universal at below 60 sen , I heard both will Double up their price in NO TIME.

Once they double up, please don't forget to thanks me, and put up the naked photo of "Kucing"

mj said...

Tx for your informative blog. Having read this May thesis, I'm pretty convinced that the market will be undergoing a significant correction. Market action is still behaving with patterns I previously had envisioned. However, now the swine flu has become a complicating factor with
unpredictable consequences. For now, I believe that the risks are not being properly accounted for in
financial markets.
Am I uncomfortable? Yes. It feels like I am getting in front of a freight train. However, when one invests against the short-term trend at potential turning points it will tend to feel this way. Just bought some FAZ and SKF for May expiration. Also wary of the Stress Test results due May 4.

plas said...

mayday,mayday..those who sell this may will be caught with their pants down. jus kid'ng.
this yr,a lot of catching up.I notice that 'blue sheep'took up most of the action.hardly much for 2nd B,mesdaq & warrant yet.
those that need to break out of 10sen is still lacking..those penny stock lost its shine??

Eric How, said...

Someone's meat might be someone's poison. You just can win the whole world with the same thing.
Like circumstances here, a "distractful" pictures can be a enjoyable moment or the other side.
That's why package is created. Just to meet "multi-need" demand.
To me, I enjoy it so much! For the pictures in here, I think it's great!
Cheers......Great Weekend Ahead

Eric How, said...

Someone's meat might be someone's poison. You just can win the whole world with the same thing.
Like circumstances here, a "distractful" pictures can be a enjoyable moment or the other side.
That's why package is created. Just to meet "multi-need" demand.
To me, I enjoy it so much! For the pictures in here, I think it's great!
Cheers......Great Weekend Ahead

stormillionaire said...

@ ccdev

I'm betting you don't know any middle eastern "arseholes".

So why not keep your primitive comments to yourself.

Good day.

ccdev said...

stormillionaire,

yeah, whatever gets u hot.

p/s - dali, great work with the writings and eye-candy, man.

WY said...

Hi Dali,

Thx for your many insightful posts.

There are some instances that the pictures made the texts harder to read.. E.g : on posts of
"our very own PIXAR genius", "many sectors moving above its 200-day M.A."..

Wonder anything can be done to make it easier to read.

Don't mind the pictures, though. Important is the content.

Gary said...

dear s-dali,

this is YOUR blog, and u hav been most generous and witty with ur ingenius commentary gems :)

pls ignore intolerant readers lacking self-control ;)

cheers,
gary

Denny said...

love the contents and the Candy Pictures!! Love it big time.

Kevin Leong said...

I am enjoying read your blog and enjoying the pictures you posted. It is not easy to find the right pictures,

good picture... as long not totally nude, I believe is ok

Btw Dali, what happened to your EAH ? down from the sky to current price of 0.41 after your call, should we cut loss or buy in more ?

mj said...

Someone's meat might be someone's poison. You just can win the whole world with the same thing

Dear s -dali, I have followed you on ytlland at 2.01 months ago, it is now 1.7+, is it time to buy in more at current level ?

your prompt reply is very much appreciated.

thanks.

Salvatore_Dali said...

kevin mj,

i will not get all things right ... i may think fundamentals are ok or the timing is ok ... but there are other things i cannot control ... if macro factors suddenly turn (which affected ytl land, in feb and march) ... or if some substantial holders of shares decide to dump in a rally ... sometimes there are pckets of ppl who hold a few million shares ... once they see volume perking up, they sell ... if there is sufficient buyers to take those stale bulls/or stale bears out... good, if not, there's nothing much i can do... i do not run the temasek fund, if i do then u can be sure all my picks will go up.

Kingsmen said...

the familar saying is factually actually wrong...selling should starts somewhere around 14 april then it will hit the feverish peak about a month later which should be around 1 week from now...BEGIN BUYING NOW IN MAY, COME JUNE YOU'LL BE RICH SOON.

Mr ICICI said...

hi salvotore,

i always look forward to reading your blog.

frankly, im not too concerned about whether you get all things right about the stock, but just make sure you get the PICTURES right.

btw the pictures are amazing. nothing distasteful about it.

more pictures of tiffany lee pls!

kucing said...

Strange ?

Why this BN's ass French kisser LENO mentioned my name here ?

kucing said...

YB Dali,

Don't know have you noticed, due to your "indecent pictures", many refered you as "Hum Sup Dali" in an investment forum ! :)

Don't worry, Dali, as a guy, I could understand how a guy think, want and "react"( or "erect" - sorry naughty one) !
You have done nothing wrong, just being bloody honest as a guy !