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Did stocks make a significant local minimum Nov. 15th?

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November 23, 2012 – Comments (7)

I would Like to see what happens next week before deciding, but, so far, price action has been encouraging.  Republicans seem to be getting over their shock and disbelief after the election results the week before.  Those who sold in May should consider getting back in if they haven't already.  Those who ranted, raved, and railed against selling in May were wrong again this time around.

7 Comments – Post Your Own

#1) On November 23, 2012 at 5:59 PM, valuemoney (99.99) wrote:

#9) On May 14, 2012 at 10:20 AM, edwjm (99.77) wrote:The month is almost half over. If you stayed in, are you glad?

I just owned BRK.B and I am glad I didn't sell in May and go away.

May 1st closing price of Berkshire: $81.46

Todays closing price of Berkshire: $88.50

8.64% return with no trading costs, no taxes and Berkshire is STILL undervalued. I bought more in fact the other week @ $87 a share.

Market closing price is higher today than it was May 1st also. So those who sold in May and did not get back in and are still considering it if they haven't already are about even MINUS unessicary trading cost and tax consicences if not in a tax sheltered account. Plus the fact you are not sure until next week. So if it is higher next week it is a good time to get back in if you haven't gotten back in already? Then I would in the red even more. Don't get me wrong I see your point from a trading perspective and if you would have sold the market on May 1st and said if the market goes down 5 to 10% and just get back in right away I would have been fine with that but just selling and going away and trying to time it based on emotion is not what the average investor should have done. Sorry I just like taking the other side of it. :)

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#2) On November 24, 2012 at 12:51 PM, edwjm (99.87) wrote:

valuemoney:

Results for individual stock will, of course, vary widely.

For the markets in general as measured by $DJI, the proper dates to sell and rebuy would have been May 1st and November 15th.  Of course, there was no way to know that in advance.  The closing prices for the $DJI on those two days were 13279.32 and 12542.38, representing a decline of about 5½ % before trading expenses.  I will let you be the judge of whether or not that would be worth the considerable risk involved in getting the timing right.  Rignt now, as I type this, markets are closed and the $DJI stands at 13008.68.  You don't like $DJI?  The corresponding figures for $SPX (the S & P 500) are 1405.82,1353.33, and 1409.15.  In that case the drop was only 3¾%.  But then you could have done even better by buying back June 4th ($DJI=12101.46, $SPX=1278.18) and selling again on September 14th ($DJI=13533.94, $SPX=1485.77).  In the case of the $DJI, you would have been even better off waiting until October 5th to sell again at 13610.15, but it would be rediculous to suppose that you could have forseen such things in advance.  Sorry, but I do not have the corresponding figures for an individual stock such as BRK.B. 

As I have pointed out before, basing decisions of whether to buy or not to buy on the calendar is not wise.  Using historical statistics to model future price action is most unwise, but there is evidence of a very small statistical advantage to selling rather than buying in May.  Thus those who are want to post here advice to not sell in May, as one person I personally find very annoying seems intent on doing repeatedly, are peddling even worse advice, "Sell in May and go away is the wrong way to play; be prepared to buy stocks every single day!"  Decide when to buy or sell on valuation, earning, sales, growth potential, dividends, management, balance sheet, or products in development, but not on the calendar!

Please do not think that I have missed the point of your comment.  I understand.  Your point is well taken.  But please understand the point I am trying to make also.

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#3) On November 25, 2012 at 8:19 AM, valuemoney (99.99) wrote:

Don't get me wrong I see your point from a trading perspective was in my comment above.

At the end of the year get a chart make a post and ask what the 4 best months out of the year to BUY were. I bet May will be one of them! There will be only 3 months were the S&P traded UNDER 1300 and May is one of them. So one could argue BUY in May! Just some food for thought. :)

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#4) On November 25, 2012 at 10:01 AM, valuemoney (99.99) wrote:

but there is evidence of a very small statistical advantage to selling rather than buying in May.

I would like to see your data on that. Here is my data:

S&P 500 Average Monthly Returns:

1926-2010                                          Monthly Averge Returns

January                                                         1.43%

February                                                        .09%

March                                                            .79%

April                                                               1.66%

May                                                                .29%

June                                                               1.07%

July                                                                 1.94%

August                                                            1.23%

September                                                      -.64%

October                                                            .49%

November                                                       1.06%

December                                                       1.8%

S&P total returns from 12/31/1925 to 12/31/2010

I would argue the data shows Febuary May and September are the best months to BUY historically.

I guess my only point is not to try and time the market. I am not saying don't sell in May (Those who ranted, raved, and railed against selling in May were wrong again this time around). But I am also saying Sell in May and go away isn't such a good idea either. In fact that stradegy is a market loser. Historic data proves this.

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#5) On November 25, 2012 at 10:15 AM, valuemoney (99.99) wrote:

Everyone should read these three books. The Only Three Questions that Still Count, Markets Never Forget But People Do and Debunkery. All by Ken Fisher. Interesting reading if I do say so myself. It shows a lot of these market Myths and backs it up with the historical data.

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#6) On November 25, 2012 at 4:26 PM, edwjm (99.87) wrote:

Historical results will vary slightly depending on the dates used and the index used.  In the case of the results you posted the number for May is slightly positve rather that slightly negative, but still all the numbers in your chart are within 2% of zero.  You don't give the standard deviations for your numbers, but I am sure they would alll be considerably larger than the averages posted.   

Again I say, " Decide when to buy or sell on valuation, earning, sales, growth potential, dividends, management, balance sheet, or products in development, but not on the calendar!"

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#7) On November 26, 2012 at 2:35 AM, awallejr (83.96) wrote:

Except "price" is important too.  End of May was a good time to buy just as 2 weeks ago was.

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