Sell in May

Biderman on the sell in May theory. It was proven right in 2011 and 2010. Is this time different?

In 2010 the US stock market peaked at the end of April and then sold off until the Fed announced QE2 several months later. In 2011 the stock market peaked at the end of April and sold off until the Fed announced Operation Twist several months later.

This will be the third year in a row that stocks have started selling off in May. I predict the drop will continue until the Fed announces the next version of stock market stimulus; probably in August at the Fed’s Yellowstone confab.

Why stock prices did not peak at the end of this April was that in April 2010 and April 2011 there were decent inflows into US equity mutual funds and US ETFs. This April there were outflows not inflows from both US equity mutual and Exchange Traded Funds.

Remember all there is in the stock market are shares of stock, 80% of all stock being owned by intermediaries such as mutual, exchange traded, pension and hedge funds. Since the start of October, which was right after the FED announced operation Twist, stocks are up by 25% or so. Video below.