Be aware. The stock market will most likely take a dive by mid-May.

[StrongBad]

This has nothing to do with Obama or even further the state of the economy. Generally this time period is when traders sell off and go on vacation for the summer, providing little volume and buying activity.

Add to this the fact that we've had a pretty consistent upward run the past couple months and you're looking at a hard sell-off.

Be prepared for Freeper types to blame this turn on Obama, but in reality this is a typical pattern that happens every year in the stock market.

[BeFree]

1. What?

You saying the scumbags who run the world's biggest Ponzi scheme are gonna do a little profit taking? Sell now or forever hold your one day worthless stocks, would be my advice. Beat the big boys to it.

[CoffeeCat]

3. Will you come live in our house?

Ok, I need someone like you on my side. I begged my husband to get our 401k out of the stock market. It took four
months of begging, but we finally got out last November. Whew!!

Now, he's saying that we need to get back in!

I'm about ready to lose my mind. I can't even imagine getting back in.

He believes in the market, I think it's a Ponzi scheme that will implode soon--after the criminals rob the peasants
one more time!

help!

[Towlie]

7. Strike a compromise. Keep most of it in safe harbor and invest a little in stocks.

Then later one of you can say "I told you so" but you won't be broke.

[JayMusgrove]

16. Just tell him you want to control 50% of the value, and do what you want

And he can do what he wants with the rest.

No, it's not a Ponzi scheme, but it's not for amateurs, either.

If he is a stock broker, he's a salesman, if he's an investment analyst, he's corrupted by what little information he gets, if he's not either of these, he's an amateur. Pure and simple.

When you have 40% MORE than he does with his half two years from now, he'll start listening to the fact that he's either a salesman, a poorly informed analyst, or an amateur... those are the only 3 people investing these days.

[StrongBad]

6. If you're investing long term this sort of fluctuation shouldn't concern you.

Most likely it will recover to this point at least by year's end.

[quiller4]

2. Historically that is true but the May sell off has been

followed by June and July buying frenzies for the last few decades because traders don't really "go on vacation" anymore. The is no real change in trade volume over the summer anymore like there was until about 1980. Investopedia has a graph in an article called "Capitalizing on Seasonal Fluctuations". Talking heads are expecting a sell-off to begin in the third week of May followed by a rally lasting through August.

[StrongBad]

5. My experience is that it is true that the rally begins around mid to late August...

...and that September could potentially be the worst month of the year if the fundamentals are poor. It will be interesting to see how the market acts coming out of the summer this year.

[Peacetrain]

4. Sell in May. buy in October.. is a standard or many for eons

But I am sure the freepers will conveniently forget that

[onenote]

8. do you have a link to back this up?

I checked back to 2004 and the Dow Jones has been higher at the end of May than it was at the beginning in three of those five years. It was down slightly over the course of the month in 2006, but that was part of a trend that lasted several months. And it was down in 2008, but again, that was part of a trend -- the market was down in Jan and Feb, picked up slightly in March and April, and then started a decline in May that, despite some minor ups and downs, was mostly down the rest of the year.

[StrongBad]

10. I didn't say that the selloff would bottom in May

The pattern states that sell offs which happen in May will stabilize again by October but it can happen anytime before that. There is no set date as to when stocks will stop the fall.

Here is the data I found since 2004:

DJI Report

May 14 2004: 10012
August 6 2004: 9815

May 13 2005: 10140
Oct 21 2005: 10215

May 5 2006: 11577
July 14 2006: 10739

May 25 2007: 13507
August 17 2007: 13079

May 2 2008: 12891
July 11 2008: 11100

The only year where this didn't hold since 2004 is 2005, which produced a 100 point gain in the time between May and October. This is very sluggish activity suggesting low volume, and the reason why a selloff didn't happen that year is because stocks were pretty much fluctuating around those levels all year.

We had a bit of irrational exhuberance this year, suggesting that a correction is inevitable. I would wager that stocks will retreat to prior lows beginning this month, yet perhaps not bottoming until as late as October.

[quiller4]

15. look for a graph that covers a much longer period

the one I was looking at covered 1968-2008.

[Towlie]

9. Right now the S&P 500 is higher than it's ever been since Barack Obama took office.

It might not close this high, but right now it's above 915.

And I have some of my retirement money in an S&P 500 index fund - not all, but some.

[avaistheone1]

11. Are you saying "our country's economics are sound"?

If you are not, then the jump in the stock market is just another Ponzi scheme.

[karynnj]

12. Well seeing that a random walk best models the direction the

market will take in the near term - anything you say has a chance of happening. It is true that the last 2 months have been a nice recovery.

In mid April, I was at a dinner party where someone said the market will fall by the end of the month to below where we were at the low in January. He spoke of how if you look at the past lows - the overall trend was negative - and each low was lower than the previous. Now, given that he was fitting a straight line, his result was obvious. I pointed out that his method ignored that at some point the market would bottom out and not go lower when it fell again.

The fact is that the market could plateau where it is, it could rise or fall a small amount or drastically - all for reasons we don't know yet. Theoretically anything now known or expected should be already reflected in the existing numbers.

[Towlie]

13. I can't see any sign of this alleged mid-May dive in past charts.

It's easy to check. On the Google Finance page you can key in any stock, mutual fund, or index, and drag a chart around with your mouse to focus on any period you like.

I'm focused on the S&P 500 because I have money in an S&P 500 index fund, so I looked at several past years. I can't see the slightest sign of any characteristic dive behavior in mid-May.

http://www.google.com/finance?q=INDEXSP:.INX

[StrongBad]

14. See post 10.