Don't Be Surprised If Market Stalls

Gregory A. Clay • by Gregory Clay

Option Trading Strategist & Financial Writer • May 8, 2017 at 12:14 PM EDT

Over the last 21 years, the market’s performance in May has been on the tepid side.

Market Summary

Quarterly earnings season is starting to wind down and the focus will now switch to economic data. March was a month with unexpectedly low inflation readings and the next few weeks in May might be when April's price data, boosted by both food and gas, start to rebound. Jeff Hirsch in the Almanac Trader talked about how over the last 21 years the market’s performance in May has been on the tepid side. Over this time period may is DJIA’s and Nasdaq’s 8th best performing (or 5th worst) month of the year. May is the 7th best month for S&P 600, 6th best or Russell 1000 and 5th best for small-caps. Average gains range from a high of 0.9% for Russell 2000 down to just 0.1% by DJIA. The first week of the month has been bullish before the market musters a comeback that stalls around mid-month. From mid-month until the 18th trading day, the historical trend has been lower. A month-end rally also fails deliver. Only Russell 2000 has historically closed the month out meaningfully higher than it was when May first began. The updated graph below indicates investors have converted to “risk-on” trading, selling off gold and buying all types of equities. As usual the Nasdaq index is the market leader pulling the other equity indices higher.

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