Sell in May and go away?

The month of May begins the so-called “worst six months of the year” according to Stock Trader’s Almanac.  May does tend to be a volatile month from a seasonal standpoint. 

An investor who bought the S&P 500 every October 31 and then sold the following April 30 would be up 898%, notes Bespoke Investment Group.  By contrast, someone who bought every April 30 and sold in late October would have gained just 56%. 

There is a chance the market will shrug off the May seasonal weakness tendency this year if recent investor behavior is any guide.  Investors have been using market pullbacks as buying opportunities this year and have so far shrugged off underwhelming earnings reports.  As Barron’s recently noted, “Calendar trades are more guideline than gospel.”  Barron’s goes on to ask rhetorically, “With global central banks finally printing money in concert, will 2013 avoid the [spring] swoons of years past?” 

The next few days will go a long way toward answering this question, but the answer is leaning toward the affirmative.  [Excerpted from the May 1 issue of Momentum Strategies Report]