S&P 500 Preps for Sell in May and Go Away Strategies

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On Friday, stocks fell slightly. The Dow Jones Industrial Average and the S&P 500 each declined 0.2%, while the Nasdaq finished unchanged and the Russell 2000 fell 1.2%.

Despite Friday’s round of profit-taking, the month of April lived up to its reputation as one of the best months of the year, noted in the DTA of April 3 as up, on average, about 1.9% since 1950. This year’s performance missed the average gain, but the S&P 500 still managed a gain of 0.9%. The gains were the result of strong earnings from some key stocks.

Despite Friday’s decline, the energy industry enjoyed a rebound fueled by solid earnings results from Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX). XOM rose after reporting that its profit more than doubled in Q1, and CVX jumped 1.2% after reporting a profit in its first quarter of 2017. In another sector, Amazon.com, Inc. (NASDAQ:AMZN) rose 0.7% after exceeding analysts’ estimates.

One reason that stocks closed lower on Friday was the Commerce Department’s report that GDP rose at a seasonally adjusted rate of just 0.7%, which fell short of expectations of 1% growth.

At the close, the Dow Jones Industrial Average fell 41 points, closing at 20,941, the S&P 500 lost 5 at 2,384, the Nasdaq fell a point to 6,048, and the Russell 2000 closed at 1,400, off 17 points. The NYSE’s primary exchange traded over 1 billion shares with total volume of 3.7 billion shares. The Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, decliners led by 1.8-to-1. Blocks on the NYSE fell to 7,549 from 7,793 on Thursday.


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S&P 500 Preps for Sell in May and Go Away Strategies

Over one year ago, the S&P’s trusty 17-month moving average told long-term investors to “Buy.” And that signal was continued again in April. However, I advise caution since for several months price has exceeded the moving average by over 10%, and is now at 10.4%. As we enter the month of May be aware that May’s returns from 1985 to 1997 returned an average gain of 3.3% per year (Stock Trader’s Almanac 2017), with 13 straight gains. However since 1998, May has been up 10 years and down eight.

Conclusion: “Sell in May and Go Away” and returning after Halloween has consistently outperformed other monthly timing strategies. It is the best six-month strategy for the intermediate-term investor, producing an eye-opening compounded return of 7.4% since 1950 through 2015 vs. an average gain of just 0.4% for investments made from May 1 to October 31 during the same period. For additional proof of its validity, as well as lots of other geeky stats, I recommend that readers obtain a copy of the Stock Trader’s Almanac. It’s a great source of information that will help you with lots of other timing strategies.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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