401K Monthly Analysis – Sell in May and… 5/8/16

It is May again and the old proverb “Sell in May and Go Away” comes to mind. But will that be the right move?

When I did my monthly analysis on my previous employer’s 401K where I have funds in, the top choice was to stay in Fidelity Govt Income Fund. I am currently 20% invested in that and rest is money market. I am cautious on my investing and see no point in taking unnecessary risks right now. The market is pretty murky and one cannot clearly see the bottom. See my chart below on DIA (Dow Jones 30 ETF). It shows a divergence in price versus the indicator above it.  See the orange line sloping down off the indicator’s last two peaks while the green line off the price peaks is sloping upwards. That suggests that although price is rising, this is not a strong move.

The latest jobs report was tepid. To me that is actually good. I would rather see slow growth than a rapid one and us reaching full employment rapidly and interest rates rising. As it is we are at 5% unemployment which is historically a low number. It is certainly a lot lower than 7 years back when we had 10% unemployment and jobs were tanking. China showed lower exports and imports - shrinking. And my emerging markets chart (EEM) has fired off a down signal. See chart below.

The US dollar actually dropped below its support level. And what has been rising lately is Gold. See chart below on GLD. What has been rising very, very rapidly is the 3xleveraged Gold Miners ETF fund… NUGT. I will write about that in my next blog.

Meanwhile I will look at cautious trades such as selling vertical call spreads on market ETFs such as DIA..