Sell in May and Go Away, Is it True ?

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Staff member
“Sell in May and go away,” is an adage on Wall Street that refers to the fact that stock prices tend to fall in May through September.

A review of the past fifty years shows that holding stocks only from October till the start of May showed 10 times greater gains than holding stocks only from May till September.

Seasonal tendencies in stock and futures prices are an important predictive tool. For example, based on past studies, the market tends to decline in May and June and also September and October.

In fact, almost all stock market crashes occurred in October, including the crash of 1929, the crash of 1987, the crash of 1989, and the crash of 1997. No question that the best time to buy stocks is near the end of October.

One reason is that tax-loss selling by institutions occurs in October. Also, stock prices tend to fall in December due to tax loss selling by individual investors.

Another important seasonal tendency that has existed since the 1920’s is the end of the month phenomenon.Stock prices tend to rise on the last trading day of the month and the first four days of the month.

In fact, if you had invested in the stock market averages only during those five days since the 1920’s, you would have shown better gains than if you had been in the market the whole time.On those five magical days, stock prices rise 70% of the time during bull markets and 50% of the time during bear markets.

Why? One reason is that pension and market fund managers receive distributions from employee paychecks at the end of the month and must invest those funds.

Seasonal tendencies also apply to futures and commodities.For example, based on a past study that spanned ten to fourteen years, corn prices (based on weekly nearby futures) tend to make their highs for the year in June or July and make their lows in December; soybeans make their highs in May and lows in October and November; wheat prices tend to make their highs in December and January and lows in May.

As you can see, seasonal tendencies should be considered when dealing with either commodities and futures or stocks. You have to take advantage and consider every tool at your disposal to play this game well.
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