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Sell in May (but don’t go away) Part II ?

Posted By Barry Ritholtz On May 2, 2005 @ 7:25 am In Markets,Technical Analysis,Trading | Comments Disabled

Last year about this time, we discussed why the seasonality trade might fail: Sell in May (but don’t go away) [1].

We could see a similar pattern develop this year, albeit with a few modifications. In 2004, a series of sell offs and rallies led to new low in August. That very oversold condition led to a rocket launch that lasted til year’s end.

While I do not believe we are as oversold here, we could see a decent bounce back towards all that overhead supply from the prior trading range. A failure at those levels could set up a sell off into early Summer. If we get to very oversold levels (worse than the present level) we could see a stronger rally that lasts the rest of the year.

Therefore, I remain a seller of any move towards Dow 10,400 and Nasdaq 1990.

Once again, you can Sell in May — but do not go too far away!


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[1] Sell in May (but don’t go away): http://bigpicture.typepad.com/comments/2004/05/sell_in_may_but_1.html

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