Monday, June 9, 2008

Sell in May?

It's that time of year again, “Sell in May and Go Away”, so I will upload up my annual post of statistics using the help of the Stock Trader’s Almanac written by Jeffery A. Hirsch and Yale Hirsch.

For the record, I don't sell just because the calendar says May but I do enjoy sharring the statistical data (it is very interesting):

Worst six months of the year begin in May:

* All data is from the DJIA from 1950 to 2005

  • A $10,000 investment in the DJIA compounded to $544,323 for the period beginning in November through April over the past 56 years (termed the best six months)

  • Compare this to a $272 loss; yes I said loss for the same investment in May through October (termed the worst six months)

  • 44 of the 56 periods ended with a gain in the November through April period

  • Only 33 periods ended with a gain versus 23 losing periods in May through October

  • The average gain for the November through April period is 7.9% (56 yrs)

  • The average gain for May through October is 0.3% but the period did have an overall loss of $272 as mentioned above

  • The best six months gained 11,691.79 Dow points over the 56 yrs (data ends in 2005)

  • The worst six months actually lost 538.98 Dow points

  • Top performing period for best six months was a gain of 29.8% in 1985 and then 25.6% in 1998

  • Top performing period for worst six months was a gain of 19.2% in 1958 and then 16.9% in 1982

  • The poorest performing period for the best six months was a loss of 14.0% in 1969 and then 12.5% in 1973

  • The poorest performing period for the worst six months was a loss of 25.2% in 2002 and then 22.4% in 1974

  • The best six months has only had one losing period in the past 22 years and that was only 2.2%

  • The worst six months has had eight losing periods over the past 22 years with several in double digits

  • Seven of the past eight years have been losers for the worst six months

  • All of these results are based without timing the market using technical analysis

  • Using a simple MACD indicator to time the entries and exits, the gain during the best six months rises up to $1,548,121 while the loss during the worst six months increases to $6,646.

  • Finally, five of the last nine May months have been down for the markets; starting the period of the “worst six months”

One side note: the Stock Trader’s Almanac notes that the Nasdaq actually has a best eight month period from November to June.

For further detail, grab a copy of the Almanac as I buy one every year for the excellent statitical information and the great quotes.

For all CP sell articles, visit my category on selling or short selling!