In the Basic model, our three positions are SOXL, TECL, and TMF. TMF is a new position entered on Thursday at the open. In the Stops & Targets model we are out of SOXL, and have full positions in TECL and TMF.
The SPY closed the week up +0.76%. The ETF Sector Plus model was up +2.24%. The ETF Sector Plus Strategy is up +49.45% year-to-date compared to its benchmark, the SPY, which is now up +8.63% year-to-date.
This Week’s Strategy Lesson: Is “Sell in May” losing some Cachet?
There is an old adage in markets that you should “Sell in May and Go Away.” It’s probable that this originated from the tendency for New York fat cats to pull money out of stocks to take prolonged vacations in the Hamptons, leaving markets in a slump over the hot summer months. And just looking at the data, it would appear to bear out this aphorism.
Over the last 50 years, during the November through April period the Dow Jones Industrial Average typically outperformed the May through October period by almost 6% a year. It should be noted though that the summer months still had a positive return, just noticeably lower.
And putting performance aside, for many active traders, these months can present further problems with very low trading volumes causing many promising trades to wither on the vine with no real follow-thru.
Though, low average returns and volume might not be enough reason to completely take a vacation from markets. Active trading requires good trading volume but many longer-term strategies rely less on intraday volume. And furthermore, while the average return over the summer is low, there’s a lot of variability in the data such that sitting out the summer every year could result in missing some very nice rallies.
The Current Condition of the Model
For the Sector model, we are in SOXL, TECL, and TMF. TMF was a new entry this week replacing ERX. We closed out of the ERX trade with just over a 29% gain. The Stops and Targets model had already been stopped out of the position for a few weeks. Fourth place and below are sitting comfortably below our top three holdings. No position changes are imminent but stay tuned to the daily updates should any position change.
Here is a summary of the weekly performance of all the ETFs that the strategy monitors:
