How would you like to take a six-month vacation?
It seems everybody is all geared up for spring break this month. But if you’re a buy-and-hold investor, get ready to take the next six months off.
You may have heard the Wall Street cliché to “sell in May and go away.”
It may be a cliché, but it works…[ad#Google Adsense 336×280-IA]The six-month period between May and November is historically the worst-performing period for the stock market.
According to the Stock Trader’s Almanac, buying the S&P 500 on May 1 each year and selling on November 30 would have generated a negative return over the past 60 years.
Not every year was bad, of course. Since 1950, the period between May 1 and November 30 has been positive 60% of the time.
But the losses during the down years eclipsed the meager gains of the up years.
There’s a lot of potential risk for holding stocks through this period, and not much potential reward. This is why it makes sense for longer-term investors to “sell in May and go away.”
But shorter-term traders should stick around.
Volatility often picks up between May and November. So short-term traders have plenty of opportunities to profit from both the long and short sides of the market.
Think about what we’ve seen over just the past two years. The S&P 500 hit its 2011 high last May, and it formed an intermediate-term top in May 2010. Traders could have made 20% or more by shorting the S&P 500 each year. Readers of Growth Stock Wire were forewarned here and here.
The S&P 500 also made important intermediate-term bottoms both years between May and November. Anyone who took our advice last October saw huge gains within just a few weeks. We saw equally impressive gains following a buy signal in June 2010.
My point is that long-term investors should heed Wall Street’s warning to “sell in May and go away.” Enjoy your profits so far this year. Take a few months off. Come back in November ready to buy.
Traders, on the other hand, are heading into a volatile environment filled with opportunities to profit from both the long and short side.
A six-month vacation sure sounds relaxing. But as a trader, I’d rather stick around and make lots of money.
Best regards and good trading,
–Jeff Clark[ad#jack p.s.]
Source: The Growth Stock Wire