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There is a very old saying in the stock market that goes “Sell in May, and Go Away.” This pertains to the notion that investors should cash in on their investments this month and take the summer off because June, July, August and September have traditionally been some of the worst months in the equity market.
Over the past decade, this adage has held true. If you were to sell the S&P 500 at the end of May, you would have avoided an loss over the past 10 years. For the EUR/USD however you would have lost out on a gain but selling USD/JPY in May would have been a great idea because the currency pair fell steeply between June and September.
Looking beneath the hood however, the decision to sell in May and go away for the summer is not so easy for currency traders because if you did so in 2009 and 2010, you would have missed out on big gains in the EUR/USD. Between June and September of 2009, the EUR/USD appreciated more than 3 percent and in 2010 it rose nearly 11 percent.
This year, there is a reasonable chance that stocks could continue to fall, leading to more risk aversion in currencies because US data has been mixed and central banks are returning to easier monetary policies. However following seasonality without following stories blindly would be a big mistake.
I have never really “believed” in sell in may and go away but after seeing it happening across the board for 2 years in a row I might follow that theory this year. Everything sold off 2 years in a row. Metals, stocks etc.
Hello Kathy ! I have found your forex blog while i was searching for related blogs at google. Just keep up writing great articles ! Iforex Review
Sell in May and go away would have been an excellent approach so far
I would say – sell in May and then – sell more in June
And maybe even more in July. Looking at fundamentals – weak south of Europe, China slowing down, only America (SP500) had its raid recently, but now definitely trend is broken.
You posted this on May 1st. Commenting after 22 days and looks like Euro and Risk currencies had a major fall throughout the month. Interesting to see how the next month goes.
Hello ..
Actually from a swing trading point of view i am waiting the weekly close under the last bottom in January 2012 .. if the EUR / USD closed below that bottom i expect to see 1.2000 – 1.2200 ..
Here is my chart ..
http://postimage.org/image/wb068u9w3/
Hope you all the best