Buy in May and make some Hay

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Because seasonality persists, it registers in societal memory. Calendar seasonalities are the most significant. There has been a lot of work on the almanac tendencies, starting from the Yale Hirsch Nov-Apr cycles, to Jan effect, and October declines (8 Sep 2008). For us seasonalities are an essential starting point to understanding the element of market timing.

Since there are different risk profiles, different holding periods, different moods and confidence levels, there is a different level of belief among market participants regarding market seasonality. The market participants who find market seasonality subjective might be holding portfolios for more than 24-36 months. Their investment approach could be more about stock selection. So what happens during a certain May month, in a certain year might be less relevant. Seasonalities could be assumed to be still a technician’s domain and novel ground for technicians turned money managers who look at model such seasonalities, but that’s not true.

At the recent Market Technicians Toronto Chapter meeting I met Don Vialoux, who has an ETF fund managing 100 million dollars. According to Don, one should enter North American Equity market on Oct. 28 and leave it at the close on May 5. Don believes in the old adage, “Sell in May and Go Away”. If you change the city from Toronto to New York, there is another veteran telling you about how before it was “Sell in May and go away, it was, Buy in May and make some Hay”. There seems to be a clear disconnect about what works or what does not. Even old adages can reverse in polarity in time. Well how strange is that? Behavioral finance would call it pattern seeking.  One man’s king is another man’s joker.

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Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


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