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Selling in May and Short Term Yen Patterns

By , Sr. Technical Strategist
02 May 2012 12:04 GMT

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Is there truth to the well-publicized ‘sell in May and go away’? Yes, but selling after May is even better. The table below lists the possible combinations (132 possible = (12x12) – 12) of buying and selling at the CLOSE of each month. The number (1-12) corresponds to the month. According to the test, buying the close of September and selling the close of May is the best option (so sell in June). The next best option is selling the July close (sell in August). In general, most top results involve buying the September or October close and selling AFTER April or June (sell in May or June). So, there is truth to the saying although selling in June is even better. The test does confirm that buying stocks over the next 2 months is a terrible idea as 9 of the 17 negative tests (yes, it is possible to have lost money in a 90 year bull market) involve buying at the close of April or the close of May.

For short term trading purposes, we must operate on the temporary but still be aware of the potential for long term changes. As mentioned in the weekly (last week), tops in ‘risk’ take time. We care about this as FX traders because the ‘risk on, risk off’ trade isn’t dead. The outstanding amount of USD denominated debt ensures that the USD will advance in deflationary periods and act as a ‘safe haven’.

Buy Close

Sell Close

Dow Points

9

5

15335

9

7

14959

9

4

14851

6

5

14541

6

4

14065

10

5

13935

10

7

13560

10

4

13451

9

8

13429

8

5

13357

2

1

13102

2

12

13078

9

6

13035

8

7

12981

8

4

12873

1

12

12453

7

5

12359

10

8

12029

5

4

11921

7

4

11875

9

3

11689

10

6

11636

8

6

11057

11

5

10851

3

1

10695

3

12

10672

11

7

10476

3

2

10383

11

4

10367

7

6

10059

6

3

9407

2

11

9389

10

9

9356

9

1

9329

9

12

9306

10

3

9248

9

2

9023

8

3

9011

11

8

8945

1

11

8764

11

10

8720

11

6

8552

12

11

8371

2

5

8351

2

7

7975

2

4

7867

1

5

7726

4

3

7592

7

3

7483

1

7

7350

12

5

7333

1

4

7242

5

3

7108

6

1

7050

6

12

7027

3

11

6982

12

7

6957

10

1

6887

10

12

6865

12

4

6849

6

2

6739

8

1

6651

8

12

6628

10

2

6581

2

8

6445

8

2

6345

11

9

6272

2

10

6220

11

3

6073

2

6

6051

3

5

5944

1

8

5820

9

11

5616

1

10

5595

3

7

5569

3

4

5460

12

8

5427

1

6

5426

4

1

5235

4

12

5211

12

10

5202

7

1

5122

7

12

5100

12

6

5033

4

2

4923

7

2

4816

5

1

4751

5

12

4727

5

2

4439

3

8

4038

3

10

3813

2

9

3771

11

1

3713

11

12

3690

3

6

3645

11

2

3407

6

11

3337

10

11

3175

1

9

3146

8

11

2938

12

9

2753

2

3

2667

9

10

2441

12

3

2383

1

3

2361

6

7

1924

4

11

1522

7

11

1410

3

9

1365

5

11

1038

4

5

484

6

8

394

6

10

169

4

7

108

12

1

23

8

10

-237

12

2

-284

1

2

-306

5

7

-376

4

8

-1422

7

8

-1528

4

10

-1647

7

10

-1765

4

6

-1816

5

8

-1906

5

10

-2131

6

9

-2280

5

6

-2300

8

9

-2678

4

9

-4096

7

9

-4206

5

9

-4580

The following illustrates monthly seasonality for the Dow. April just concluded and is historically the best month of the year. The next best month is December, then November. May is basically flat. June is the second worst month.

Should_You_Sell_in_May_and_Short_Term_Yen_Patterns_body_Chart_3.png, Selling in May and Short Term Yen Patterns

DJIA Monthly Bars

Should_You_Sell_in_May_and_Short_Term_Yen_Patterns_body_dow.png, Selling in May and Short Term Yen Patterns

The trendline that extends off of the 1937 and 1966 tops served as support after the tech bubble, was resistance last April and is a few hundred points away from yesterday’s close. A Fibonacci extension is of interest at 13526.36.

USDJPY HOURLY BARS

Should_You_Sell_in_May_and_Short_Term_Yen_Patterns_body_usdjpy.png, Selling in May and Short Term Yen Patterns

I’m trading USDJPY (long against 7960), CADJPY (long against 8050) and USDCAD (short against 9980) right now. The 5 wave advance from yesterday’s lows in the USDJPY and CADJPY (and every Yen cross other than EURJPY) reinforces a bullish bias against yesterday’s lows (use stops). As for USDCAD, 9925 is resistance and 9980 is the pivot.

To contact Jamie e-mail jsaettele@dailyfx.com. Follow me on Twitter @JamieSaettele

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Jamie is the author of Sentiment in the Forex Market.

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02 May 2012 12:04 GMT