Sell In May And Go Away...Wrong!

1.) SUMMER – We’re entering the summer months now, and every year around this time the “Sell in May and go away” crowd starts making the rounds again like clockwork. Financial TV loves it because it’s catchy and sounds actionable. Investors love it because it gives them something simple to repeat at barbecues. And, right on time, the market didn’t cooperate with the cute slogan. May has been pretty strong. Depending on what time you turn on CNBC, apparently we’re either entering a recession, overheating into inflation, collapsing into deflation, or replacing all human labor with robots by Thursday afternoon. Yet stocks are getting accumulated. Think about how many reasons investors had to get defensive recently. Rates ripping all over the world. Geopolitical tensions still exist. Worries about energy and AI destroying humanity. When markets perform well during periods where they’re supposedly vulnerable, I want to pay attention to that. Historically, one of the characteristics of healthy bull markets is their refusal to go down when conditions appear perfectly set up for weakness...and participation in this market continues to be strong. That’s keeps telling me it’s still a healthy bull market. Does that mean we won’t see a “pause” or digestion of recent gains? Of course not. Just that the data and participation would suggest that a slight correction would be buyable more than anything.

2.) PROFITS – Profits / Earnings have been said to be the mother’s milk of markets. They are needed. If that’s the case, then the fundamentals also still look good. Margins are on track to expand for most sectors in 2026. Looking out further, only two sectors (Real Estate, Communications) are expected to have lower margins in 2027 vs. today.

3.) OIL – After making its second lower high on May 19, as of this morning WTI crude is now down another ~15% . WTI is trading at about $92.20, but basically has just been chopping sideways in a volatile manner since the beginning of March. Bottom of trend at $88 will be important. If it breaks, oil would move back into a bearish trend or downward bias. If it is going to bounce, this would be the area for it to start. If it does bounce near here…which is increasing in probability…making another lower high on that bounce would be very telling as the probability of moving into a bearish trend would increase. My short term expectation is for a bounce to a lower high toward $104, then fail.