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Sell in May and Go Away?

Investor’s first read      - Brooksie’s edge before the openTuesday, May 1, 2012        9:10 a.m. ETDJIA: 13,213.63S&P 500:   1397.91Nasdaq Comp.: 3046.36Russell 2000:

Investor’s first read      – Brooksie’s edge before the open

Tuesday, May 1, 2012        9:10 a.m. ET

DJIA: 13,213.63

S&P 500:   1397.91

Nasdaq Comp.: 3046.36

Russell 2000: 816.82

“Sell in May and go away.”  You’ll read about this one in coming days, so why not here.

This is the back-end of  the Best Six Months for owning stocks.* Both gain credibility from historical precedent indicating stocks perform better from November 1 to April 30, than between May 1 to October 31.

Of course there are exceptions like May to November in 2003and 2009 when the market was surging out of a severe bear market.

And no seasonal or repetitive pattern in stock prices is right 100%. There are always other factors to consider.

One might be the strong tendency for the stock market to be up be up over the final 7 months of a presidential election year where there have only been two losing 7-month periods going back to 1952.

Assuming the November 1 to April 30  Best Six Months started at 2011’s October 3 closing low of 10,654 (Oct.3), the DJIA has advanced 24% through April 30. That’ll be tough to beat between now and October 30, even through year-end.

But the market doesn’t have to beat it. There is room for a good investing environment going forward, however, precise timing is needed since the overall environment (economic and political) will be uncertain with some nasty corrections in the interim.

TODAY:  The market hangs tough even in face of continuing soft economic data. Does this suggest the “employment” data due at 10:30 tomorrow and Friday will surprise the Street ?

Or does it suggest Q1 earnings are buoying stock prices with a sell off coming in May/June ?

The stock market has snubbed its nose at the European “thing,” soft economic data and lofty stock prices. In fact, it reversed a bearish stock pattern last week to tip the balance slightly to the bulls.


Personal Income (8:30a.m.)  – Rose 0.4% in March vs a  revised increase of  0.3% in February following a 0.2% . Personal Spending rose 0.3% in March vs. a gain of 0.9% in February. Personal Consumption Expenditures (PCE) increased 0.2% vs. February’s plus 0.1%.

Chicago PMI (8:30a.m.) – declined sharply to 56.2 in April  from March’s  62.2 and February’s 64.0. Projections  ran between 58 and 62.9. The survey reflects manufacturing and non-manufacturing business in the Chicago area.


ISM Manufacturing Index (10 a.m.) – That short for Institute for Supply Management Index which says little in itself, but its is a survey of a wide spectrum of business including employment, production, new orders, supplier deliveries, and inventories. March was up one point to 53.4.

Construction Spending (10 a.m.) –Dropped 1.1% in February after a 0.8% drop in January.


ADP Employment Report (8:15 a.m.)– Private payroll employment gained 209,000 in March. Investors will be watching this in hope of getting an early read on Friday’s critical Employment Situation Report which hammered the market in late March.

Factory Orders ( 10 a.m.) – rebounded  1.3% in February vs. a 1.1% decline in January.


Jobless Claims (8:30) – Decline a ho-hum 1,000 claims for the week ended Apr. 21 to 388,000 from a upwardly revised 389,000 the week before bringoing the 4-week moving average up to 381,750.

Productivity and Costs (8:30 a.m.) – final estimate for Q4 was up to an annualized rate of 0.9%. Unit labor costs were up 2.8% vs.  a Q3 rate of3.9%.

ISM Non-Manufacturing Survey of 375 + firms (10 a.m.) fell 1.3 points to 56 reflecting a slowdown in new orders to 58.8 from 61.2.  The Index encompasses agriculture, mining, construction, transportation, communications, wholesale and retail trade.


Employment Situation (8:30 a.m.) – new hires increased a very disappointing 120,000 in March vs. a rise of 240,000 in February and 275,000 in January. Included is the Unemployment Report which dropped in March to 8.2% from 8.3% in February.

George  Brooks

*Stock Trader’s Almanac


The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

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