Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (12749)	4/30/2015 8:47:08 PM
From: Goose94	Read Replies (1) \| Respond to of 202373

Could "Sell Stocks In May" Prove Gold Bullish? April 30 —It isn't even May yet, but the stock market carnage appears to be starting now. The old market saying: "Sell In May and Go Away" has an uncanny performance record in the U.S. stock market and a number of variables leave equities vulnerable to a corrective pullback or even more in the months ahead. Let's take a look at the numbers behind the sell in May stock market adage and explore what this could mean for gold. It turns out the old adage holds water. The sell in May timeframe corresponds to The Stock Trader's Almanac's "Best Six Months" and "Worst Six Months" in the U.S. stock market. Here are the basics on that phenomenon. The Best Six Months in U.S. stocks historically unfold from November through April, while the Worst Six Months are seen May through October. "Since 1950, DJIA and S&P 500 have produced the bulk of their respective gains during the Best Six Months. DJIA has averaged 7.6% during the Best Six Months compared to just 0.3% during the Worst Six Months since 1950. S&P 500 averaged 7.1% during the Best Six Months versus just 1.3% during the Worst Six Months since 1950," says Christopher Mistal, director of research at Stock Trader’s Almanac. There are some potential explanations for the seasonal underperformance starting in May. "Market seasonality is a reflection of cultural behavior," Mistal explains. "In the old days, prior to 1950, farming was the big driver, making August the best market month—now it’s one of the worst. The Best Six/Worst Six Months pattern is most likely the result of summer vacation behavior where traders and investors prefer the golf course, beach, or poolside to the trading floor or computer screen which contributes to the summer doldrums." The U.S. stock market is vulnerable to the downside this spring and summer due to a number of factors. Corporate earnings growth is slowing and on the verge of being negative. U.S. economic activity has cooled in recent quarters. First quarter GDP surprised on the downside with a mere 0.2% rise. The Fed could raise interest rates later this year. Within six months of the first Fed rate increase, the stock market has fallen by 5 percent or more 80 percent of the time, says Sam Stovall, chief equity analyst at S&P Capital IQ. Sluggish global growth and persistent instability in the Middle East are also concerns. The S&P 500 has gone more than 42 months without a decline of 10 percent or more. The average period is 18 months. The stock market is overdue for a correction, according to Stovall. There are havens for stock investors during this time period. "Traditionally, defensive sectors and Treasury bonds have performed well during the Worst Six Months. Consumer staples, Health care, Utilities and even gold have outperformed the S&P 500 during the Worst Six Months going back to 1990," Mistal notes. Gold is a traditional safe haven and hedge. The U.S. dollar has marked out a minor top on the daily chart at the mid March high and is trending lower in minor short-term downtrend. The greenback is vulnerable to stronger declines. Stocks are entering a seasonally weak period and are vulnerable to a variety of economic and market factors to a correction. As most precious metals traders know, gold tends to trade in an inverse relationship to the dollar. Gold has a historical tendency to trend in the opposite direction of stocks as it is viewed as an alternative investment and hard asset. Bottom line? Stocks and the U.S. dollar are vulnerable to weakness this spring, which could unleash a fresh safe-haven appetite for gold. The most successful traders plan their trades and trade their plan. Now is the time to devise your strategy.