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May 2019

Sell in May and Runaway: from 1962 - present, this is the first time this has happened

If you’ve been avoiding a cfd stock trading account, it's time to pay attention. History says that the stock market is set to break down of the starting gate for its worst ...

Sell in May and Runaway: from 1962 - present, this is the first time this has happened

If you’ve been avoiding a cfd stock trading account, it's time to pay attention. History says that the stock market is set to break down of the starting gate for its worst six months of the year. BUT, there is a sign of something more sinister that’s going on in the stock market.

The “Best Six Months” strategy has become legendary on Wall Street. “Sell in May and go away” means investing in the stock market between Nov. 1 and April 30 and switching into fixed income for the other six months. This has dramatically outperformed owning stocks from May 1 to Oct. 31.

An investor putting $10,000 into the S&P 500 between May 1 and Oct. 31, 1950 to the present would have $4,138, an astonishing loss of $5,862. An investor putting $10,000 into the S&P 500 from Nov. 1 to April 20 over the same time period would have a gain of $2,836,350. That is not a typo. We are talking about a gain of $2,836,350, versus a loss of $5,862.

These results were obtained by adding MACD triggers, certain buy and sell signals generated by the technical indicator.

It is the end of May, and while the outperformance has not been as strong recently, someone is secretly smashing the stock market at night (New York Time). The stock market has been rallying throughout the day and selling off at night throughout the recent stock market decline.


Source: SP500 Weekly Chart, AM Broker 

Over the past 8 days of the counter-trend, the S&P has rallied more than 1% during the day and fallen more than -4% at night. From 1962 – present, this is the first time this has happened. Is this a sign of something more sinister that’s going on in the stock market?

One could argue “in the midst of a trade war, foreign investors are selling U.S. futures (overnight) while domestic investors are buying (daytime).” A more conspiracy driven explanation would be “China is selling U.S. stocks to hit back at the U.S. during this trade war”.

We don’t guess or create random theories to explain why the stock market is doing what it is doing. Most of those guesses are no better than 50/50 bets. Instead, we just look at the charts.

Revisiting the Scene of the Crime?


Source: SP500 Weekly Chart, AM Broker 

The S&P500 has been dancing on these MA levels during the last years, wich can be a huge distribution pattern.

If a 52-weeks breakdown will occur, the downside risk increases and the next 6 month may bring a 15-20% decline in the stock market. 

Categories:  Investing