Sell in May and go away

Most of us are familiar with the saying, ‘Sell in May and go away’. Does this probably mean that financial markets will turn in June? Personally, I really do not know and I do not subscribe to this saying. If you remember, May 2009 IS a good month!

Today, May 31^st  being the day for end of month, how did markets perform for the month of May 2011? As you probably know

·         Global Equity indices are lower

·         Commodities like Oil is lower

·         Currencies like the Euro, Aussie, Lonnie is much lower

·         Gold is neutral and

·         The US dollar index is much higher.

What does this mean?

In my interpretation, Gold being neutral means there’s still a demand for safe haven. Commodities are lower means there’s speculation that global demand is not that optimistic. High yield currencies are lower probably means speculators are not willing to take higher risk. Notwithstanding, weak economic data from the US, the S&P downgrade outlook for US debts, etc the US dollar is much stronger? Together, as a whole you should be able to interpret, right?

Today, currencies are much higher, so are commodities like Gold and Oil, Regional equity indices in Asia and Europe closed much stronger. You will probably read news like

·         Nikkei rises on recovery signs, Asian markets closed much higher

·         Speculation that Greece will get more aid, Euro roars to a 3 week high

·         Gold steadies as Greece is in focus

·         Global demand for Oil, dollar weaken, Oil rises

The fact though closed higher for the day, the market trend for the MONTH is lower. My personal interpretation is that most global investors are still probably watching from the sidelines or sitting on the fence. I noticed that since mid last week, there emerged bargain hunters and speculators who may be anxious to take on more risk.

However, is it time to buy? Personally, I would not speculate with just 2-3 days of fundamentals or data or optimism. You might want to ponder

·         Is the US dollar index getting much stronger? Any sign of inflation or US rate rise?

·         Is there global demand for Energy? Higher stock prices

·         Is global weather hindering the supply of agricultural commodities? Demand?

·         Are earning ratios attractive?

·         What’s the status of Europe debt crisis?

·         How are economic data of the world’s largest economy (US, China, Japan, Germany)?

·         How will QE2 end in June?

If you have the answer to all the above questions, that’s where the financial markets will be heading towards.