The fifth month of the year is here. And, for many mainstream financial players, that means folding back the dog-eared pages of the "Traders Almanac" chapter titled, "Sell In May and Go Away."
So, is it smart to follow this age-old Wall Street adage?
Well, it may help to go back and see how the other, similar saws of wisdom have panned out over the last year:
"Halloween Jinx": According to the usual pundits, the black mood surrounding the October 31 holiday scares the bull-jeezus out of stocks. YET -- thanks to a string of 700-, 800-, and 900-point rallies, the final days of October 2008 saw the biggest weekly gain since 1974.
"Santa Claus Rally": So goes the saying, the jolly spirit of ole Saint Nick carries over into stocks. YET -- 2008 marks Wall Street's worst annual performance in over SEVEN decades. Respectively, the Dow lost 34%, the S&P 500 lost 38%, and the Nasdaq Composite suffered its worst year ever.
"As Goes The First Week of January, So Goes The Month": In the first week of January 2009, the stock market enjoyed a powerful winning streak of over 20% gains, prompting these exuberant headlines: Get Ready For a "New Bull Market," "New Cheer On Wall Street," and "Stocks Start Year With Bang."
YET -- by the time January came to its conclusion, the S&P 500 closed its worst opening month since its creation in 1952. The long-awaited "President's Rally" was also a no-show.
So -- Sell now and don't come back until the start of some obscure British horse race? (I.e. St. Leger's Day) The choice comes down to this: Old adages, or objective analysis? As for the latter, Elliott Wave International is the ultimate source.
Here, the following archive of E.W.I.'s recent publications reveals the true benefit of our expertise:
Timing: One week before the U.S. stock market landed at its 12-year low of March 9, our February 27, 2009 Short Term Update utilized a specific turning pattern to outline a specific time window for the onset of a major upside reversal. In STU's own words:
"By all indication, this pattern is back on track... the turn will come on or near March 10, 2009. Anywhere in this time period may mark a turn, which will obviously be a market low."
Elliott Wave structure: Once the bullish winds of change had turned, the March 16 Short Term Update wrote:
"When the market speaks, it behooves us to listen. The implications of this are that the... major stock indexes are in the initial stages of a multi-month advance."
Sentiment: Soon after, the April 2009 Elliott Wave Theorist filled in the final panel of analysis and wrote: "The rally should regenerate substantial feelings of optimism."
Flash ahead to today: The May 1 Short Term Update picks up where the April Theorist left off and presents the following close-up of the S&P 500 versus the 10-day Daily Sentiment Index.
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The message from this chart alone blows every half-proven proverb out of the water.
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