Green's Portfolio Blog - May 2021

Summary

• Markets continue their strong moves up, clearing the low earnings hurdles.
• Will this be a "sell in May" year?
• Here are the two most important indicator charts to watch.
• Trade activity for May is posted here daily, as updates.

Thanks to readers who Follow my Green's Portfolio monthly progress articles.

I don't have to tell anyone that this is a great market for making money - at least on paper.  But how one brings home the gains is the big question:  hold for more upside or take profits when they look out-sized compared to the norm?

May brings the classic question of whether to "sell in May and go away," implying that the second and third quarters are more sluggish and that re-entering the markets in fall is the winning ticket, after taking profits now. I heard this morning on Bloomberg that something like 90% of companies have met or exceeded their earnings expectations for Q1 so far.  Does that mean that the bar was simply too low, even for the climb back to normal after COVID?  One commentator projected that earnings will be strong again for the next quarter, with slower increases following later this year and into 2022.

I learned years ago from my swing trader teachers (Nick and Gareth at InTheMoneyStocks) that bull markets always include participation of the financials and also usually small caps.  The best way to see this is to look at the SPDR Select Sector Financials ETF, XLF.  Here's a weekly 5-year chart:

The turmoil of the past 3 years is easy to see - the spring 2018 correction, the fall 2018 bear market, and the spring 2020 COVID panic.  The gap up after the recent election and steep climb are also easy to see.  So from a technical view, the markets is getting a bit oversold, especially compared to the weekly 50 and 100 period moving averages (magenta and black lines, respectively).

Here's the same chart set-up for the Russell 1000 ETF, IWM:

So we will see how long this continues.  It has been said that markets can continue their runs longer than you have patience.  If the leadership of financials and small caps is true, then we should look for a break and confirmation below the weekly 7 MA (blue lines).

Wishing all the best for your investing/trading!

=Green=