If April’s 1% gain holds, the market will mark its 6th consecutive month up. It doesn’t take a rocket scientist to figure out the laws of averages will eventually kick in, thrusting the market into correction mode. Being that the month of May is traditionally a bearish one, I thought it’d make sense to shed some light into the inner workings of May and what makes it so god damned retarded.
First of all, over the past 20 years, the SPY has been up 55% of the time in May, so it’s not a hugely negative month. I am more focused on recent history, regarding the market being down more than 6% twice– out of the past three years.
The best performing sector, by far, are closed end muni funds. It seems the entire investment community throws their money at them in May, as well as utilities. These are very traditional risk off sectors.
SOXS and SQQQ sport an average return greater than 14.5% over the past three years. You get the gist.
Outliers include names such as K, OVTI, GIS, S, ENTR, DLTR, as well as about 75 others.
Out of the 430 mega cap stocks traded, the following perform worst in May:
CIG, TSU, KB, CCI, CBD, ARMH, FTE, TSM, DEO and SCCO.
The last time the market went straight up like this was last year, with the SPY booking five consecutive barn buster months, only to slow down and cool off in April–to the tune of a mere -0.67%. The following month, in May, the SPY got crushed by -6.01%–which was nearly recovered in June when it booked a +4% return.
If a -6% loss for the SPY seems like a little, think again small pleb from the interwebs. The SMH shed 10% in May of last year.
Be on guard for an egregious downside reversal.
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