The Annual Summer Sell Question is Back
As the month of May comes to a close, the big question we always ask ourselves; Do we sell in May and go away this summer or do we stay for a post COVID rally as summer heats up in a reopened America?
Before we get into answering that question this year, let’s take a look at where the markets currently stand. All three U.S. financial markets are close to their all-time highs. We can see below that the MACD signal line indicates a new swing to the up side is about to start.
The $QQQ, which is the ETF that represents technology and growth companies of the Nasdaq 100, has put in a lower high (shown below). This is slightly more bearish than the Dow Jones industrial average and S&P 500 represented by the $DIA and $SPY. This is not surprising as we are now in inflationary times. Technology and growth companies rely more heavily on financing and loans which are negatively affected by inflationary concerns. The Dow Jones has more value and industrial companies tend to fare better during periods of inflation.
The S&P has many oil industry related companies. A sharp increase in travel is expected as most of the world has not traveled for slightly over a year. This summer is expected to be a strong recovery summer as many people have been pent-up and saving their money.
We do have to consider that financial markets do not always represent what is actually happening in the economy. The financial markets represent what is to come in terms of earnings growth and prospects for big corporations that are represented by their equities (stock or shares) and denominated in dollars on financial exchanges. The U.S. dollar is revisiting its most recent low and might be getting ready to rally in relation to the rest of the world’s currencies. The dollar has been on a long term decline, but the recovering United States now seems to have fully reopened. U.S. tourists are even being welcomed back to many destinations around the world, as almost 40% of the U.S. is fully vaccinated (CDC, 2021).
The bitcoin bonanza seems to have come to an end this past month, as it retraced 50% from its high. This can be seen below by the gray scale ETF tracking stock $GBTC.
Gold as represented by $GLD has regained a bit of its glitter. As bitcoin has unwound, gold returned as the logical offset to inflationary concerns (see below).
Let’s revisit our initial question: ‘Sell in May and go away’ or do we stay to continue to play the markets this summer? We will answer one market catchphrase with another: you never go broke taking some profits. If you’ve caught a nice run in the financial markets this is a great time to book some profits and take some money off the table. If you’re going to reinvest, look for bargains in value stocks and in stocks that might do well with a reopened economy. For example, travel stocks, cruise lines (cruises have yet to resume), and gold/silver look set to shine again as bitcoin and digital assets are dealing with some new governmental uncertainties.
Have a great start to your summer, lock in some profits if you have not already done so, and trade well.
Centers for Disease Control and Prevention. (5/26/2021). CDC COVID Data Tracker. Centers for Disease Control and Prevention. https://covid.cdc.gov/covid-data-tracker/#vaccinations.
Market Research and Analysis provided by Michael DiGioia, Director of Educational Services
What’s New from DAS
We released a new production version during the month of May: 220.127.116.11. This version includes an extensive list of enhancements and bug fixes to the DAS Trader Pro platform:
-Montage window: Added “RangeMkt” stop order type to support range market order (trigger as market order for both sides).
-CMDAPI: Added quote time field (T:HHMMSS) which sends level1 data ($Quote).
-Fix issue where the Positions window unrealized column didn’t refresh if it’s 1st column.
-CMD API bug fix: tms crash.
-Batch short locate: Added error message display if there is any error.
-Update so that chart order supports DAY+ order type.
-Check if the account name field is empty before allowing the creation of a new account.
We highly recommend that you review the release notes here.
Please be sure to install the latest version of the DAS Trader Pro platform. You can do this very easily from DAS by clicking Tools > Auto Upgrade. You can learn more about the Auto Upgrade feature in our Knowledge Base.
We have released Beta version 18.104.22.168 which is available for all to test. However, you will need to fill out the contact form on our website and include the firm/broker you’re trading with as well as your login ID.
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