Positive month of May in the main stock markets
There is no doubt that we have all at some point heard the famous phrase 'Sell in May and go away' in relation to the financial markets. This famous phrase refers to the theory that during the period between the months of November and April the growth in the stock market is higher than the average growth of the months between May and November. Therefore, this phrase recommends closing our positions and waiting for the summer period to pass in order to resume our activity.
As in any theory, this has a point of validity, because since 1964 the SP500 has closed in positive during the period between November and April in three out of every four years. This is possibly due to the optimism of investors for the end of the year and with the expectations of the following year, although some experts also indicate that the climate could be a determining factor in terms of the timeframe, since during the autumn and winter months, the trading volume increases with respect to the summer months, as during periods of good weather investors are more aware of their free time.
But if we look at this year so far, we can see that May in general has been a positive month for the main stock indexes, since these have not only maintained their main support levels, but also most have managed to close in the positive, as in the case of the DAX30, IBEX35, SP500 or DJ30 with rises of 1.88%, 3.79%, 0.55% and 1.93% respectively. Meanwhile, the Nasdaq index closed the month with a decline of 1.53%.
Future expectations may give a new boost to the economy worldwide, thanks to the improvement of the situation of the pandemic due to the vaccination process with the reopening of economies and tourism. However, we will also have to be attentive to the possible measures taken by the different central banks in the face of the upswing in inflation and the current stimulus programs.
DAX30 Analysis
If we focus on the German DAX30, we can see that in recent months it has maintained a clear upward trend that led it to mark new all-time highs during this month of June thus continuing with the last upward momentum that began in the middle of last May after bouncing for the second time at the monthly lows in the red band.
Currently, we can see in its stochastic indicator that the DAX30 is experiencing a strong overbought so we cannot rule out that it will experience some pullback to its support levels. At the moment, its first level of support is at its average of 18 white sessions in the area the highs of last April. The loss of this level could open the door to a possible further retreat to last May's lows in the red stripe.
The loss of this level could lead the price to test its important uptrend line, although as long as we maintain these support levels the feeling will remain uptrend.
Evolution in the last 5 years:
- 2020: 3,6%
- 2019: 25,48%
- 2018: -18,26%
- 2017: 12,51%
- 2016: 6,87%
IBEX35 Analysis
The selective Spanish, is being one of the main protagonists of this stock market year as it is experiencing a clear upward trend that has gradually led it to recover the 9000 points marking annual highs at 9256 points at levels not seen since the end of February 2020.
The IBEX35 has not yet recovered to pre-pandemic levels, so it could still have a upward path to an area close to 10,000 points if it manages to consistently overcome and maintain its current resistance represented by the green band.
It should be noted that the Spanish economy greatly depends on the arrival of tourists, and as a result the country has suffered badly throughout the pandemic. However, the future signs look rather positive, in terms of vaccination programme progression and the gradual re-opening of major economies.
Evolution in the last 5 years:
- 2020: -15,45%
- 2019: 11,82%
- 2018: -14,97%
- 2017: 7,40%
- 2016: -2,01%
SP500 Scan
If we focus on the daily chart of the SP500, we can see how during the last few months it has followed an important upward trend within the red channel, which began after forming the double ground between the months of September and October of last year, as represented by the red stripe.
In recent weeks, we can see how the price has begun a lateral movement of consolidation between the green and red bands, which act as its main support and resistance levels.
After a positive close during the month of May, the price is trying to overcome its resistance level that could lead it to mark new all-time highs. A failure in this attempt could cause a pullback to the lower band of the upside channel where a new momentum could begin. The loss of this channel could bring doubts and take the price to the red bottom band where we would have to pay special attention, since the loss of this level could be an indication of a possible change of trend in search of its average of 200 sessions in the red.
Evolution in the last 5 years:
- 2020: 15.05%
- 2019: 29.09%
- 2018: -5.96%
- 2017: 19.08%
- 2016: 8.80%
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