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Saturday, May 18, 2013

Reminder: "Sell in May" is not "Sell on May Day"

In an obvious effort to keep bullish sentiment high, the financial networks have been harping on how “Sell in May” has not worked this year. What they are really saying is that selling on May Day (the first day of May) hasn't worked. But, the seasonal strategy of selling isn't limited to the first day of May at all. And, that's where these financial journalists just don't seem to get it.

The seasonal topping period for equities spans from May and into June. Typically, the market does form a top in the early part of May and decline. But, the market tends to form a low in May and start to rally into June. Consequently, in most years, the market will retest its May high in June. So, perhaps “Sell in May” should be more accurately said as “Sell in May-June” instead.