Outlook: Mixed Signals

The market continues to show lots of volatility, as it has since the last week in April. The indexes had been solidly on the plus side before that, but broke down sharply in May, showing a 7.9% loss for the month, the worst May performance since 1940, when Franklin Roosevelt was president, the minimum wage was 30¢ per hour, and gasoline was 11¢ a gallon. World War II was also just getting going at the time. The loss for that month was a whopping 21.7%. After dropping 5 out of 6 weeks, stocks were up the past two weeks in a pattern that might be the start of base-building. Wall Street has many sayings, some of them good and some of them bad. One that has worked out with lots of accuracy is "Sell in May and go away." As we have noted in the past, the entire stock market gain since 1950 has come in the "good" six-month period between November 1 and April 30. Every penny of the huge gain. A person who somehow only held stocks during the "bad" six months from May 1 to October 31 actually lost money. The Dow Jones Industrial Average was probably around 300 back in 1950, has been as high as 14,000, and is currently around 10,450, so somehow to find a strategy to lose

money in that time frame is unbelievable, but that is what happened. This was discovered many years ago by Yale Hirsch, the founder of the Stock Traders Almanac. I recommend that... Read More