OT Buy or Sell in May

Long the wisdom on Wall St is to sell in May and buy again in Nov.

With one trading day left in May S&P 500 (VOO) is up about 1% and Nasdaq (QQQ) is down about 1%. Call it a wash, appropriate for the very wet May we have had around here.

So is it a buy or sell this year in May? Will the indexes be at least 5% lower or higher on Oct 31?

Nasdaq (QQQ) is down about 1%. Call it a wash

I guess, you missed the 50% rally from the bottom on many software, fintech/ payment names. For ex: SQ after hitting low of $65, it is now back to $90, UPST low $25 now, $50, AI $13.37, now $19.73.

I have done dozens of analyses on this effect, which has been observed for several centuries and keeps on ticking, on average.
(a slightly stronger effect is the month-end effect, so at least don’t sell before the end of trading June 2)

The major conclusions of all that analysis work:
If what you own is not overvalued, don’t sell in May.
If what you own is overvalued, go ahead and sell!

Will the indexes be at least 5% lower or higher on Oct 31?
Yes, probably : )

Jim

If you really want market predictions, hey, look no further.
Look for any one of these three things to be bullish before buying back again.

Conservative, safe time to buy back in, but probably a bit late:
Index touches the sold dark blue line along the top of the graph https://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&…

Blue line gets above red line, similar comment about conservatism:
https://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&…

Shorter term, faster reacting, greater odds of being too soon. But well suited to tech stocks.
Blue line gets above rad line
https://stockcharts.com/h-sc/ui?s=$NAHL&p=D&yr=0&…

There are all “chartism”. But, on the other hand, I have done a whole lot of statistical work on them.
So they are not JUST chartism–they are also well constructed but possibly entirely misleading predictive models : )

Much better to check in on the value of what you own.

Jim

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Shorter term, faster reacting, greater odds of being too soon. But well suited to tech stocks.
Blue line gets above rad line
https://stockcharts.com/h-sc/ui?s=$NAHL&p=D&yr=0&…

Jim

Do you have any thoughts on why the magnitude of the positive and negative values of the $NHNL are increasing. Going back to 1990, 2020(Covid) had the largest negative value and May 2022 has the second largest negative value. 2021 had the largest positive value. So the magnitude of the recent values exceed the GFC and the Dot.com boom/bust.

Craig

https://stockcharts.com/h-sc/ui?s=$NAHL&p=D&yr=0&…
Do you have any thoughts on why the magnitude of the positive and negative values of the $NHNL are increasing.

That graph is a graph of the difference between the number of new highs and the number of new lows.
If there are lots more lows than new highs, you will get a downwards spike on the graph of the difference which becomes a big magnitude negative number.
This is generally a sign of indiscriminate selling.
Since this is the Nasdaq, it would be a sign of indiscriminate sign mainly among growth/tech/speculative issues.
(when very very extreme, this is a strongly bullish signal, commonly a cyclical market bottom)
So, the most obvious interpretation is that recent bearishness has been so bad it’s good.

But, with a bit more nuance…why the big spikes recently, especially relative to the credit crunch?
A lot of revulsion lately would be one interpretation, sure.
But another simple interpretation is that there have been lots of new issues lately, a reverse of a long running trend.
The number of Nasdaq firms peaked around 5800 in the tech boom, down to a dreary low around 2500 in 2013, and recently back up to around 5000.
So, two effects: a lot of those issues were junk, so it’s easy to envision them making new lows : )
Plus, statistical noise alone would suggest that bigger gaps would be expected when comparing two subsets within a bigger population.
When I do my analysis on new highs an new lows, I always express the figure as a percent of issues for that reason.

As for being “so bad it’s good”, my tea leaves suggest this was recently true.
Not “so bad it’s great” (not a cyclical bottom),
but at least “so bad it’s pretty good”, in that a bounce lasting for maybe a month or so would have been expected after around May 12.
At the moment, the Nasdaq 100 Equal Weight is up 7.5% since then.
Given the bearishness that week, such a result was apparently not the assumption of most people.

Jim

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