Sell in May and go away

Just like OCT low, “SELL in MAY and go away” is a well documented expression. It might look coincidental now that our time windows also point to a MAY turn and low. Coincidence is another way to relate to things that human’s don’t comprehend. Blaming it on chance seems an easy way out. This was the similar coincidence, which was observed when we talked about OCT lows holding and when we talked about MAR CYCLES turning up.
If a time forecast gives more than 50% accuracy, its more than statistically significant. If the time forecasts push as high as 65%, it should ring a bell and be noticed. 100% accuracy and probability does not exist. It’s an illusion. If you are expecting RSR to deliver more than 50-65% accuracy, you are expecting too much.
To understand the time forecast a bit better, we turned to this month’s RSR. This is the first time we are plotting the RSR sentiment index (ProEXBETFI1) with the BETFI data for that month. The left hand scale (LHS) is the index readings and the right hand scale (RHS) is the BETFI. What we see here is that bullish % sentiment reading have rushed up to NOV levels. This is not chance. The respondents who take the sentiment survey are a significant sample and the very fact that readings jumped to NOV highs is clearly related to the price jump up in Nov. The bullish sentiment increased as markets rose. It might look surprising but BETFI NOV highs were at 17,000 just 300 points below current levels.
How would be interpret this data? 77% bullish percent in NOV and 73% bullish readings now are significantly high values. Ideally a case of sustained bullishness can not be built around such high values. The bullish readings should drop and rebuild before we start seeing further upside. This is what we said last time, when we said that though there is a clear break in yearly trend line on sentiment, a retest back can not be ruled out before markets start rising again. This is why “SELL in MAY and go away” might just work out yet again.
ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM
ORPHEUS RESEARCH AT REUTERS – USA