Beware The Middle Of May
Jay Kaeppel | May 04, 2016 04:51AM ET
The beginning of the month of May and the end of the month of May into early June have overall been a decent time to be in the stock market. The middle of May, typically not so much.
For our purposes, we will split May (into June) into three segments:
- Segment 1: The first 3 trading days of May (bullish)
- Segment 2: May trading days #4 through #16 (bearish)
- Segment 3: May trading day #17 through the 5th trading day of June
Figure 1 displays the growth of $1,000 invested in the Dow Jones Industrial Average only during the first three trading days of May since 1934.
Figure 2 displays the growth of $1,000 invested in the Dow Jones Industrial Average only during trading days 4 through 16 of May since 1934.
Figure 3 displays the growth of $1,000 invested in the Dow Jones Industrials Average only from the close of May trading day #16 and the close of the 5th trading day of June.
Combining and Comparing
In Figure 4 the blue line displays the growth of $1,000 invested in the Dow only during Segment #1 and Segment #3. The red line displays the growth of $1,000 invested in the Dow only during Segment #2.
- During Segments #1 and #3 the Dow gained +157.5%
- During Segment #2 the Dow lost -51.1%
Get The News You Want
During 2016:
- Segment #1 extends from the close on 4/29/16 through the close on 5/4/16
- Segment #2 extends from the close on 5/4/16 through the close on 5/23/16
- Segment #3 extends from the close on 5/23/16 through the close on 6/7/16
Summary
So is the Dow sure to gain ground during Segments #1 and #3 and to lose ground during Segment #2? Not at all.
For the record:
- Segments 1 and 3 combined have gained an average of +1.2%, with 65% of years showing a gain and 35% showing a loss
- Segment 2 has lost an average of (-0.8%), with 49% of years showing a gain and 51% showing a loss
So clearly there are no “sure things” being unveiled here. Still, if the early days of May see the stock market register a meaningful gain, it might make sense to avoid jumping on the band wagon.
At least for another 13 trading days.….
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.