Sell in May and Go Away

There’s a hoary old saw on Wall Street – Sell in May and Go Away. As with many such sayings, there are some fundamental elements behind it. The idea is that this year’s pretty well known and next year won’t come into focus until the fall. So, why not flatten out your positions and head to the beach?
Given the volatile nature of the current environment, the Sell in May crowd may not want to get far from their trading monitors. The economy seems to have battled off the mat and is now merely bad. But as this morning’s ugly factory orders data showed, growth remains elusive. Data in the summer months will have a strong bearing on whether the Green Shoots crowd has it right or if something worse is in the offing.
Some of today’s tentativeness likely stems from what’s coming next week. The Federal Reserve stress tests probably won’t shock, by design, but the lack of shock will raise more questions about the quality of information we’re getting from the financial sector. This will addle more than encourage.
Also, next Friday the monthly jobs report for April is due. It will likely be another humdinger of the bad variety which won’t help sentiment matters.
We’re in a tricky spot. Sentiment has improved, expectations have risen and people believe the worst is over. But what is ahead? That’s a mystery that will keep investors more focused than usual over the coming summer months.
http://blogs.wsj.com/marketbeat/2009/05/01/stay-in-may/