Another Paradigm Shift in the New Market?

I took a much need trip to visit family in North Carolina over the weekend.  Although I spent most of the weekend poolside or on the golf course, I did ‘some’ work and stayed connected to email, quotes, and related news.

I pondered on the market during the riveting drive through the Appalachian Mountains.  The old market adage of “Sell in May and Go Away” still holds true to a large extent relative to volume, but with the advent of online trading, 24 hour news, and access to WiFi anywhere, this may be changing.  I literally uploaded the Market Monitor in the middle of nowhere in West Virginia last Thursday.  It seems the only way to truly get away is to go overseas, where mobile phones and computers do not mesh with the local ‘grid’.

Here are the results for the S&P over the last 5 summers; 2008 (-13.8%), 2009 (+6.4%), 2010 (+1.0%), 2011 (-7.6%), and 2012 (+10.6%).  So far the index is up close to 2% since Memorial Day this summer. Separately, the Stock Trader's Almanac has found that August is the worst month of the year in post-election years as well.

By no means do we think that the gains or losses occur in a vacuum and there is definitely less volume over the summer months as high-frequency traders go on their own vacations. 

What does this mean?  Unfortunately, this means that the retail investor has got to pay attention constantly, particularly in the small cap space.  With exactly one month left in the unofficial summer calendar the market definitely has some momentum.  Traditionally, August has been the slowest month by volume, there will still be plenty of opportunity for short term trades.

Maybe it should be “Sell in May and Stay in the Game”.

Have a great day.

Aaron  Schweitzer

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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