If there is anything to recall relative to the current top-heavy market it would be this: what goes up must come done. And this brings us to “Sell in May and go away,” a ritualistic saying that may or may not is good advice. It truly depends on the market.
The market does not behave on ritual. It is cyclical, pattern-driven and historically bent. But it is not ritualistic. Does this mean traders should not follow the annual advice about “sell in May and go away?” The reality is that the market can, has, and will act differently each and every May. The wins (or losses) a trader encountered will determine whether he or she should sell or buy in May. After all, every portfolio is different. There isn’t a one-size-fits-all strategy. It’s all about doing what’s best to suit each trading style.
However, the reality of today’s market suggests traders seriously consider selling this May, or soon thereafter, but not going away entirely. Think about divesting to build up a bank for the correction that is surely coming. Remember Newtonian physics – what goes up must come down. Be aware, the market has been defying Newton for some time now and the apple is hanging precariously on its branch. But gravity will surely take over eventually.
By any measure, the market is overpriced. For example, the Schiller P/E ratio shows a market almost 10 points higher than the historical mean (25.35 now vs. 15.65 historical). There are more metrics, and here are 20 of them according to Bank of America.
Metrics aside, the biggest reason a trader should prepare for stepping away in May, or soon thereafter, is there is no rational for the big climb since November. The hope that the current political administration and Congress might produce tax reform and remove the regulations that keep the greed of big banks in check is not a solid platform upon which the current lofty market stature can stand. So far we have seen how well this dynamic duo has performed.
The point is this– the market will correct. It always has and it always will. Maybe not this May, but soon enough given the historical patterns of money movement in the summer. Having suggested this, it does not mean traders simply disappear.
Rather, do this instead:
- Keep a watchful eye and be prepared to get out when the correction arrives.
- Be patient. As with all corrections, they do not happen overnight.
- Use the right tools to track individual markets for short-term movement within the ups and downs of the correction. Find those trend resistors.
By modifying the strategy to adapt to the changing market conditions (whatever they may be and whenever they may happen), traders don’t have to “Sell in May and Go Away.” Instead, they can put themselves in a position to find profitable positions in any given season (and market condition).
The VantagePoint Difference
Smart traders find ways to make money. And all traders want to be smart, right? A tool that can help the timing and give accurate forecasts 1-3 days in advance will be crucial to every trader’s timing strategy. VantagePoint Intermarket Analysis Software provides that forecast with up to 86% accuracy.
Take a look at Nokia ($NOK). Using the power of Artificial Intelligence and Intermarket Analysis, VantagePoint predicted a bullish trend starting in late April. In the 13 trading days since predicting the trend, the stock has rallied 18.73%. At a very affordable $5.25 share price, traders could have invested a small amount to yield large gains.
Had a trader followed the “Sell in May and go away” logic they would have missed this short trend to make a very easy profit.
Despite volatile market conditions, there is always an opportunity to make money with the right tools and understanding. A blind strategy is a poor strategy. Don’t let this be you. Use VantagePoint to your advantage and find those trend-changing trades that can keep you successfully trading while others have simply gone away in May.
What goes up will always come down. Do you have the right tools to handle a market correction?
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