Sell In May and Go Away...or don’t

By Lawrence G. McMillan

One of the luxuries of publishing a “double issue” is that we can spread our range of topics out a bit.  That’s what this article is about.  It’s confirming and recounting some technical studies that have made their way around lately.  They don’t necessarily have anything to do with the option market directly, but they certainly have to do with market direction and volatility.  There are several technical studies presented in this article.  Most of them are rather long-term, so we would not necessarily be using them directly in our trades, but they are certainly useful as a guide, and then shorter-term, sentiment-based indicators can be used to refine the timing of these longer-term signals.  

An Interesting Footnote to “Sell in May and Go Away”

Last week, on CNBC, a study apparently done by Wayne Whaley was cited.  The study said that when the Standard & Poors 500 Index ($SPX) makes a new all-time high in May, the rest of the year is positive, not negative.  That’s not exactly the same as saying that “sell in May and go away” doesn’t work, but I think we all know of years when there were big rallies in the summer – so we know that “sell in May and go away” is just a rule of thumb and not a strict performance guide, year in and year out.  

Not wanting to merely accept someone else’s work without checking, I coded up a study of my own...

Read the full article (published on 5/23/14) by subscribing to The Option Strategist Newsletter today. Introductory 3 month trial subscriptions are available for only $29.