May Almanac: Better in Post-Election Years By: Jeffrey A. Hirsch & Christopher Mistal | April 25, 2017 | Email | Print

 

 

Continue to hold long positions associated with DJIA’s and S&P 500’s “Best Six Months.” We will issue our Seasonal MACD Sell signal when corresponding MACD “Sell” indicators applied to DJIA and S&P 500 both crossover and issue a new sell signal.

 

 

May has been a tricky month over the years, a well-deserved reputation following the May 6, 2010 “flash crash”. It used to be part of what we called the “May/June disaster area.” From 1965 to 1984 the S&P 500 was down during May fifteen out of twenty times. Then from 1985 through 1997 May was the best month, gaining ground every single year (13 straight gains) on the S&P, up 3.3% on average with the DJIA falling once and two NASDAQ losses. 

 

In the years since 1997, May’s performance has been erratic; DJIA up nine times in the past nineteen years (three of the years had gains in excess of 4%). NASDAQ suffered five May losses in a row from 1998-2001, down – 11.9% in 2000, followed by ten sizable gains in excess of 2.5% and four losses, the worst of which was 8.3% in 2010. 

 

Post-election-year Mays rank at or near the top. May is the top performing NASDAQ and Russell 2000 month in post-election years. The Russell 2000 has been up 9 straight with gains averaging a whopping 4.6%. DJIA and S&P 500 (since 1953) have been nearly as strong, with May ranking 4th and 3rd respectively.

 

 

May begins the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” Our “Best Six Months Switching Strategy,” created in 1986, proves that there is merit to this old trader’s tale. A hypothetical $10,000 investment in the DJIA compounded to $843,577 for November-April in 66 years compared to $319 loss for May-October. 

 

Monday before May option expiration is much stronger than expiration day itself albeit weaker for small caps. Big caps have only registered seven losses in the last twenty-nine years. Expiration day is a loser nearly across the board; Russell 2000 posts a marginal average gain. The full week had a bullish bias that has faded in recent years. The week after options expiration week now favors tech and small caps. DJIA has fallen in eleven of the last eighteen weeks after.

 

On Friday before Mother’s Day, DJIA has gained ground fifteen of the last twenty-two years and on the Monday after the blue-chip average has also risen in fifteen of those years.

 

The first day of May trades higher frequently, but DJIA has been down three of the last six first-trading days. Weakness often appears on the third, fourth, fourteenth and sixteenth trading days for large cap stocks. Mid-month strength has been fading recently. NASDAQ and the Russell 2000 take the lead the last three days of May.