Beware the Middle of May

  • SumoMe

The beginning of the month of May and the end of the month of May into early June have overall been a decent time to be in the stock market.  The middle of May, typically not so much.

For our purposes we will split May (into June) into three segments:

*Segment 1: The first 3 trading days of May (Bullish)

*Segment 2: May trading days #4 through #16 (Bearish)

*Segment 3: May trading day #17 through the 5th trading day of June

Figure 1 displays the growth of $1,000 invested in the Dow Jones Industrials Average only during the first three trading days of May since 1934.1Figure 1 – Growth of $1,000 invested in Dow Industrials during 1st three trading days of May (1934-present)

Figure 2 displays the growth of $1,000 invested in the Dow Jones Industrials Average only during trading days 4 through 16 of May since 1934.2Figure 2 – Growth of $1,000 invested in Dow Industrials during trading days 4 through 16 of May (1934-present)

Figure 3 displays the growth of $1,000 invested in the Dow Jones Industrials Average only from the close of May trading day #16 and the close of the 5th trading day of June.3Figure 3 – Growth of $1,000 invested in Dow Industrials during trading days #17 and higher during May and the 1st five trading days of June  (1934-present)

Combining and Comparing

In Figure 4 the blue line displays the growth of $1,000 invested in the Dow only during Segment #1 and Segment #3.  The red line displays the growth of $1,000 invested in the Dow only during Segment #2.4Figure 4 – Growth of $1,000 during Segments 1 and 3 (blue) versus Segment 2 (red)

*During Segments #1 and #3 the Dow gained +157.5%

*During Segment #2 the Dow lost -51.1%

During 2016:

*Segment #1 extends from the close on 4/29/16 through the close on 5/4/16

*Segment #2 extends from the close on 5/4/16 through the close on 5/23/16

*Segment #3 extends from the close on 5/23/16 through the close on 6/7/16

Summary

So is the Dow sure to gain ground during Segments #1 and 3 and to lose ground during Segment #2?  Not at all.  For the record:

*Segments 1 and 3 combined have gained an average of +1.2% with 65% of years showing a gain and 35% showing a loss

*Segments 2 has lost an average of (-0.8%) with 49% of years showing a gain and 51% showing a loss

So clearly there are no “sure things” being unveiled here.  Still, if the early days of May see the stock market register a meaningful gain it might make sense to avoid jumping on to the band wagon.

At least for another 13 trading days.….

Jay Kaeppel

 

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