Anecdotes are great fun for the media and sometimes they do come true, but are they something we should follow closely? The calendar is full of them, such as the January effect, the Summer Rally, “Bears have Thanksgiving, Bulls have Christmas”, the Santa Claus Rally, and the one coming up next week, telling us to get out for the summer,
Many of these did the opposite of what they were supposed to do in 2014 – who do we blame for a failure of the Santa Claus Rally? Santa Claus? (if you complain about him, I’m sure you will not be on his good list in 2015).
Ironically “sell in May” clashes with the summer rally theme, but, then again, these are all random in terms of time and price. These are all great to talk about, but they are not reliable notions. In this world of fast money, and even faster moving information, there really is no time to be complacent, accepting these notions as gospel.
The statistics are where the facts lie, and if you sold in May and went away your results would have been marginally better at best. This strategy failed miserably over the previous two years, and if you came back in the fall, then you found yourself way behind the rest of the crowd. At that point, with only four months remaining, could you rely on other ‘anecdotes’ to make up lost ground?
The markets will do their thing, regardless of what the calendar or “saying” is telling us. What’s critical to pay attention to are the price action, identifying trends, and patterns that work consistently, and, as well, you should use solid risk management tools, producing profits and taking them down when you want them, not when the calendar says to do it.
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