The media whom loves easy, prepackaged trading ideas has once again embraced the "Sell in May and Go Away" trading heuristic. The current supply/demand setup in stocks favors this outcome in 2012 (see chart).
Chart: NYSE Composite Average
Any investor playing short-term trader based on headline advice could sidelines without the means of knowing when to return. While Sell in May and Go Away has worked well, those that failed to add "But Don't Forget to Return" to it have been burned badly by infinity liquidity since 2009.
Headline: Sell in May and Go Away: Will It Work Again?
"Sell in May and go away." It's a well-worn trading chestnut that drives fancy fundamental analysts nuts. It's such a cliche'. But, at least for the last two years, it's been so right. In both 2010 and 2011 stocks started strong and lost steam towards the second-half. Selling the Spring rallies in both cases allowed traders to buy stocks back at radically lower levels later in the year. With the Dow Jones Industrial Average still holding stubbornly near 52-week highs and up over 8% so far in 2012 Breakout welcomes Jeff Hirsch, the editor-in-chief of the Stock Trader's Almanac; widely regarded as the go-to source for historical market data and wisdom. "It doesn't work every year," says Hirsch of the Sell in May rule of thumb, "but it's been seasonally proven, historically proven." Don't pick up your phone to dump everything just yet. "It's doesn't say 'sell May first,'" clarifies Hirsch. "It says 'sell in May.'"
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