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  • "Sell In May, Go Away" - Investing Cliche Or Effective Strategy? 0 comments
    Jun 4, 2013 1:43 PM | about stocks: SPY, DIA, IWM, QQQ

    Is "Sell in May, Go Away" just a cliche in the stock market or is there some statistical significance behind this saying? More importantly, how does an investor use this knowledge to his or her advantage? If you sell in may, when should you buy it back?

    Frank Perry just posted a series of charts showing the significant stock market dips and declines in the month of May, from 2008-2012. These, as we all know, are considered "unusual" market conditions with the financial crisis. However, similar trends have occurred from 1990-2009 and in fact, Frank included a long term chart spanning 59 years for the S&P 500. This chart shows the best and worst months in the stock market. Want to guess which season did the worst?

    Although any single year, including this year, could be an outlier where the market doesn't behave according to historical average data, investors can still strategist around these market seasonalities. Chart and technical analysis can help us identify the low points of weak months where we can "buy (it back) lower" the stocks sold in May. By avoiding the down months, then buying back lower, you can outperform the market significantly and pick up several more percentages of gains.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: SPY, DIA, IWM, QQQ
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