Sell in May and Go Away!

Sell in May and go away, if you’re not familiar with this phrase, it’s a saying frequently used by stock traders and refers to the popular belief that stock markets tend to go down in May. So, the best option is to sell and go on holidays. The last trading day of April and the first trading day of May, showed us that this saying may be true!

Sellers on the stock markets tried to stop the bullish correction many times. They had few promising occasions to do so but failed every single time. The beginning of May brings us another attempt and I have to tell You that it looks really promising.

What we see on the SP500 is a classic false breakout of a horizontal resistance, in this case it’s in the area around the 2900 points. After this, the price dropped and broke the lower line of the wedge, which in theory, kills the whole bullish movement and starts a new leg down. Only in theory though, as again, this is not the first time that sellers have had a chance for a drop. Nevertheless, as long as the price stays below the 2900 resistance level, sentiment is rather negative.

The negative setup on stocks is supported by the positive outlook on Gold. Here, the price tested the crucial support on the 1670 USD/oz again and again it looks positive for buyers. This area is absolutely crucial for the bulls and as long as the price stays above the support level, then sentiment remains positive.

And lastly just a quick update about the USDCHF, which we mentioned on Thursday, when it was still relatively high. Back then, we mentioned a nice bearish setup and the update is that it worked like a charm. The price went down almost immediately, reaching mid-April support, so around 120 pips down. The support worked, so currently we do have a small bullish bounce but the big picture here is definitely negative and sellers have higher chances of success.