May Begins The Worst
Six Months For The Dow

By Jeff Hirsch
Stocks Trader's Almanac Investor

       May has been a tricky month over the years. It used to be part of what we called the "May/June disaster area." From 1965 to 1984 the S&P was down during May 15 out of 20 times. Then from 1985 through 1997 May was the best month, gaining ground every single year on the S&P, up 3.3% on average (Dow, 1 loss; Nasdaq, 2).
        Over the past 33 years it's been a bottom-of-the-order month: Nasdaq ranked #6, average gain 0.9%, up 19, down 14; Dow ranked #7, average gain 0.5%, up 18, down 15; S&P ranked #8, average gain 0.8%, up 19, down 14. Election Year Mays however rank near the bottom, registering losses on average for Nasdaq and fractional gains for the S&P.
        The beginning month of the Worst Six Months for the Dow and S&P (not for Nasdaq) does boast a few bullish tendencies. The Dow has been up five of the last six first trading days. On Friday before Mother's Day the Dow gained ground seven of the last nine times. Monday before expiration the Dow has racked up gains twelve of the last fourteen and five of the last seven expiration days.
       Watch out though for the Friday before Memorial Day. Early departures for the first long "summer" weekend have driven the Dow down six of the last twelve years.
        The week following Memorial Day was up twelve years in a row from 1984 to 1995. The last eight years it has been up on three times but those gains were substantial: 240 Dow points in 1999, 495 Dow points in 2000 and 248 Dow points last year. Don't forget the ever important FOMC meeting on the 4th.

Rest of the year

        Overhead resistance, seasonal concerns, deteriorating internals, Election Year wranglings, geopolitical woes and potential rate hikes make it more than likely that we have seen the highs until after the Election. Having passed the sweet spot of this run we'll be served better by selling rallies and taking profits, keeping cash on hand for the fatter pitch later this year.
        Remember, we have had only one loss (undecided Election 2000) in the last seven months of Election Years and these next few months are prone to pullbacks. We are in store for year-end gains no matter who wins the White House in November. November is strongest when incumbents are ousted, down when they win. But August, October and December are strong when they win.
       Editor's Note: Jeff Hirsch, is editor of the Stock Trader's Almanac Investor, 184 Central Ave/ PO Box 2069, Old Tappan, NJ 07675, 1 year, 12 issues, $295.