‘Sell In May’ Headed This Way?

2021-04-29

The stock market started out choppy before a steady rise into the close Monday following a Fed report and strong earnings reports from big-name tickers.

Will the across-the-board gains hold or is this setting up for a “sell in May and go away” seasonal phase?

The Dow closed at 34,060.36 points to rise .71% (adding 239.98 points on the day). The Nasdaq recovered early losses to hit14,082.55  points for a .22% gain while the S&P 500 climbed .68% to 4,211.47 points.

The overall market remains uncertain even after hitting highs to this point, a Fed gushing with positivity while keeping interest rates low, higher GDP numbers, and trillions of dollars in stimulus money set to flood into the economy. And, big names in Big Tech (and other sectors) are reporting higher than expected or even stellar first quarter earnings.

Once all the good news ends after this earnings season subsides (and maybe inflation takes off?), what’s next?

An expected seasonal phase may herald more caution.

“Sell in May and go away” is a viewpoint that historically follows the “best six months of the year” from November through April. The premise is that traders should enjoy the strong six months, sell holdings in May, and return to the market in the fall.

Some of Simpler’s traders are leaning toward that viewpoint as April closes tomorrow. They have an air of nervousness along with a strong dose of realism (especially when reviewing the last 30 years of market action) compared to any “gushing” sentiment about the market.

The plan is to maintain a strong cash position without much exposure in this market while remaining open to any solid opportunities that might arise.

The next few weeks could be setting up an interesting battle between the bulls and bears. Whichever wins the trend, there will be a profit potential trade in play along the way.

We Saw: Markets recover to end the day strong — 

  • More Big Tech stellar earnings
  • Fed loving its plan for prosperity ahead
  • GDP for quarter, outlook shows economic strength

We’re Watching: Not getting extended in an extended market —

  • Opportunity outlook into May, summer
  • Capital we have in hand
  • Setups in: GLD, AMZN, TSLA, ZM, WDAY, RBLX