Now that we are in the month of May, not a single day will pass by without a question about whether traders should sell this month and go away. At the time of this post it seems like a no-brainer, as the economic reports this morning (and really for the past month) are pointing to a slowdown in U.S. juggernaut-like 2% growth. And don't you wish it was so easy? Like an alarm bell, on May 1st the black-box hedges religiously follow their algos to sell everything in sight, and we, mere mortals, just play along and get our measly share of the action. I beg to differ! If it was so easy, we would all retire young and watch CNBC just to entertain ourselves (not that we don't already). I told you previously to turn the TV off, but now I actually want you to watch and listen to every pundit call the top. Like clockwork, they will show you the historical odds and tell you how market always "sells in May and goes away". "It will not be different this time" has not worked for me for a while. Traders, it is somewhat different, at least to me. The market has never seen the unprecedented amount of liquidity thrown at it from all directions of the world, ever. How do you put historical odds on something you can't go back and compare with? All those who think that this rally is not a part of central bank-orchestrated money rain are just kidding themselves. But the fact that we know it does not mean it stops any time soon. Therefore, I say it is too early to sell in May, as the charts tell us otherwise. I do not want to aggressively buy here, but selling this market has been continuously moronic exercise for even the most genius traders out there. Just do not do it, and sit tight, and wait for that signal to go short. Meanwhile, you buy the dips and scale out at former tops, leaving small portions just in case price breaks through and carries higher. This has been the pattern all year long, period. No other strategy worked and had any success whatsoever. Calling tops is a very bad strategy here, as most indexes are in a vacuum of all-time highs. There is no visible resistance, no levels to trade against, no safe spots to place a stop at, no overhead resistance at former support levels which were broken. Pull up your charts and you will see what I mean.
Now, should we get a sell-off that is more than just a pullback, which will break previous supports and create a lower low (which has not happened this year yet), then you got your signal, your green light, your sell in whatever month it happens and go away.
As always, take my advice with a grain of salt and do you own research.
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