Murky May on the Way?
16/04/2007
Most investors/traders have bad memories of last May. Shares took a real dive and the market sank rapidly. There's one word that describes it well but sadly I can't use it on ADVFN.
Not surprisingly, many market participants are worried that it'll happen again, especially with indexes close to highs. I'm not a market forecaster and have no idea but just because it happened last year doesn't mean to say it will happen again this year.
However, the probability of a positive return is 43% and on average the market falls 0.6% in May. And May is now the second weakest month of the year, just nosing ahead of September, which is the worst month.
Interestingly enough, the FTSE 250 stocks do tend to fare better than FTSE 100 stocks in the month.
So basically there is some merit to the sell in May market cliché.
Another point is that with two bank holidays in the month and many people away, there is less volume and therefore, downward lunges can be more pronounced than they should be.
There is another argument of course. If the market does fall in May then June could be a great time to pick up bargains, which is exactly what I did last year. It makes sound sense because July and August tend to be pretty good months on the whole.
It'll be interesting to see whether we do get a repeat of last year. Of course sod's law dictates that we won't get a slide this time, simply because so many people believe it is going to happen!
My portfolio's had a great year so far with big gains in particular from Hunting, Carclo and Alterian. I just hope May doesn't come along and spoil the party!
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