May Almanac, Vital Stats & Strategy Calendar: Near the Bottom in Election Years
By: Jeffrey A. Hirsch & Christopher Mistal
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April 26, 2016
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May has been a tricky month over the years, a well-deserved reputation following the May 6, 2010 “flash crash”. It used to be part of what we called the “May/June disaster area.” From 1965 to 1984 the S&P 500 was down during May fifteen out of twenty times. Then from 1985 through 1997 May was the best month, gaining ground every single year (13 straight gains) on the S&P, up 3.3% on average with the DJIA falling once and two NASDAQ losses. 
 
In the years since 1997, May’s performance has been erratic; DJIA up eight times in the past eighteen years (three of the years had gains in excess of 4%). NASDAQ suffered five May losses in a row from 1998-2001, down – 11.9% in 2000, followed by eight sizable gains in excess of 3% and four losses, the worst of which was 8.3% in 2010. Election Year Mays rank at or near the bottom, registering net losses on DJIA and S&P 500 (since 1952), NASDAQ (since 1972) and Russell 1000 and 2000 (since 1980).
 
[Election May Table]
 
May begins the “Worst Six Months” for the DJIA and S&P. To wit: “Sell in May and go away.” Our “Best Six Months Switching Strategy,” created in 1986, proves that there is merit to this old trader’s tale. A hypothetical $10,000 investment in the DJIA compounded to $838,486 for November-April in 65 years compared to $221 loss for May-October. 
 
Monday before May option expiration is much stronger than expiration day itself albeit weaker for small caps. Big caps have only registered seven losses in the last twenty-six years. Expiration day is a loser across the board. The full week had a bullish bias that has faded in recent years. The week after options expiration week now favors tech and small caps. DJIA has fallen in eleven of the last seventeen weeks after.
 
On Friday before Mother’s Day, DJIA has gained ground fourteen of the last twenty-one years and on the Monday after the blue-chip average has risen in fifteen of those years.
 
The first two days of May trade higher frequently, but DJIA has been down three of the last five first-trading days. Weakness often appears on the third, fourth and fourteenth trading days for large cap stocks but the middle of the month tends to be rather strong. NASDAQ and the Russell 2000 take the lead the last three days of May.
 
May (1950-2015)
  DJI SP500 NASDAQ Russell 1K Russell 2K
Rank 9 8 6 6 6
# Up 34 38 37 25 24
# Down 32 28 18 12 13
Average % -0.02   0.2   0.9   1.0   1.3
4-Year Presidential Election Cycle Performance by %
Post-Election 1.3   1.7   3.4   3.2   4.6
Mid-Term -0.7 -0.9 -1.2 -0.1 -1.9
Pre-Election 0.1 0.2 1.9 1.2 2.7
Election -0.8 -0.2 -0.7 -0.5 -0.2
Best & Worst May by %
Best 1990 8.3 1990 9.2 1997 11.1 1990 8.9 1997 11.0
Worst 2010 -7.9 1962 -8.6 2000 -11.9 2010 -8.1 2010 -7.7
May Weeks by %
Best 5/29/70 5.8 5/2/97 6.2 5/17/02 8.8 5/2/97 6.4 5/14/10 6.3
Worst 5/25/62 -6.0 5/25/62 -6.8 5/7/2010 -8.0 5/7/10 -6.6 5/7/10 -8.9
May Days by %
Best 5/27/70 5.1 5/27/70 5.0 5/30/00 7.9 5/10/10 4.4 5/10/10 5.6
Worst 5/28/62 -5.7 5/28/62 -6.7 5/23/00 -5.9 50/20/10 -3.9 5/20/10 -5.1
First Trading Day of Expiration Week: 1990-2015
#Up-#Down   19-7   19-7   16-10   18-8   14-12
Streak   D1   D1   D1   D1   U2
Avg %   0.4   0.3   0.3   0.3   0.1
Options Expiration Day: 1990-2015
#Up-#Down   12-14   13-13   12-14   13-13   11-15
Streak   U3   U3   D1   U3   D1
Avg %   -0.1   -0.2   -0.2   -0.1   -0.1
Options Expiration Week: 1990-2015
#Up-#Down   15-11   14-12   15-11   13-13   15-11
Streak   U1   U1   U3   U1   U1
Avg %   0.3   0.2   0.4   0.2   -0.1
Week After Options Expiration: 1990-2015
#Up-#Down   14-12   16-10   17-9   16-10   20-6
Streak   D1   U2   U2   U2   U2
Avg %   -0.2   0.1   0.2   0.1   0.4
May 2016 Bullish Days: Data 1995-2015
  2, 3, 9, 11, 27 2, 11 2, 3, 9, 18, 27 2, 11, 31 2, 3, 11, 26, 27
           
May 2016 Bearish Days: Data 1995-2015
  4, 5, 19, 20 4, 5, 19, 20 6, 19, 24 4, 5, 19 None