The Markets and the Month of May

The US stock market will be closed on Monday 30 May 2016 as it is Memorial Day. It is a day where we honor the men and women who have died while in military service to our country.

So we will be having a 3-day holiday in the US and you know what that means. The markets have a tendency to be bullish a few days prior to the holiday. Now I am not saying that this is always the case – it is what has the highest probability of happening.

So it was no surprise that the bullish trend ahead of the Memorial Day holiday occurred this past week as the market rallied from Tuesday all the way into Wednesday. I guess most traders would not want to be caught in a short position in the event there is some really fabulous positive news over those three days.

The month of May also has some interesting significance as far as the traders go. What might that be and who might be impacted?

Longer Term Traders Beware?

The month of May is an important month as far as the stock market is concerned especially if you are a longer term trader. What do you need to be mindful of if you are a longer term trader? How would you be impacted?

I have found that the market has somewhat of a cyclical tendency – meaning that there appears to be a best time to begin longer term positions using options. For me that month happens to be October where I then do exit in the first week of May.

I also participate in the purchase of stocks and I usually begin this process in the month of January. I can then reevaluate my positions the following January and make any necessary adjustments.

Realize that whether I am participating in options or stocks as a longer term trader, it does take a bit of skill in the choosing of the instruments, it takes patience and a lot discipline. The rewards are enormous and truly amazing.

However is there such a thing as entering the markets at a time when it is less advantageous to do so? Can I be purchasing the perfect stock at the perfectly wrong time? Could I be entering the markets at a time when it is ripe for a pullback? Based on my own personal experience I do believe that is the case.

Has anyone ever heard the saying “sell in May and go away?” This would obviously have no bearing on those of us who are active traders – trading from a few days to a few weeks. However if you are a longer term trader I believe that initiating positions in May and well into September carries a bit of risk.

The markets usually make (and already have made) some pretty impressive bullish price movements up to this point in time. What I do not want to see happen is that at a time when I am seeking to initiate positions we have the typical large scale selling that could bring my stock price to a level that would in fact be more attractive towards the end of the year.

As a longer term trader I will not be initiating any new positions in May – I will simply take heed.