There is also the classic term of ‘Sell in May and Go Away’ which has been around for many years. This is an investment strategy for stocks and indexes which are based on a theory that an investor sells his stock and index long positions and then gets back into the market in November. This is to avoid the typical high volatility months of May to October. Now if we have a look at the performance of just staying away during May you see that profits would increase.
As you can see the performance if you stayed out of the market during this time, your profit would be higher than if you stayed in the market full time. Although in the 90s there was still a decent performance this stopped in 2000 and since then almost every May period there has been a decline in price. Instead of a 400% gain over this time, you would be looking at a 460% gain.
Looking at the past couple of years You have a slightly mixed picture with a gain of 88 points whereas in the 2015 year you have a loss of 196 points continuing with the trend. So does this mean that the market is changing? I think there is a difference to the current market movements, which is most likely due to central bank intervention to stop the recent decline in the stock market. There has also been a change in who are placing trades. Back in the day when trading was done by humans who gather in groups on the trading floor and then shout and exchange paper tickets.
The move to robot trading has changed the fundamental issues that affected the stock market and dictated the volumes and movements. Now with the surge in robot trading making up over half the market when the local broker goes on holiday the trades would not have been placed. Now trading can take place from anywhere in the world transacting thousands of trades every minute.
There has also been an increase in short-term trading where positions can be held for only a fraction of a second to a few days. This did not use to be the case where most if not all stock purchases were done with long-term projections in mind. Stock funds primary aims are now to capture Alpha day after day so they can report profits to their clients on a monthly basis.
The historical trends tend to point to a very high correlation between certain trading months but as we have seen this is starting to break down as changes are taking place in the market. As this change has taken place the market does not seem to be repeating historical patterns and the old advice of sell in May and go away is no longer in play.
June officially signifies the introduction of the feared or loved "summertime trading."
This time period covers June, July, and August and is loathed by most traders and dealers because trading volatility and volumes shrink, momentum becomes scarce, which is can make it harder to generate good profits for this period.
This is such as well-known phenomenon that it is spoken about across news and even social media leading to the new hashtag #SummerTrading.