“Always Remember to Buy in November”

By TradeSmith Research Team

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Watching your portfolio drag day after day gets old… really fast.

Outside of the Magnificent 7, most stocks are heavily underwater this year.

As painful as this is, the sour sentiment is actually quite consistent throughout history.

This isn’t to make light of the recent drawdown. Rather, it’s to equip you with evidence that better days are likely coming in a big way.

Data shows that November kicks off one of the most seasonally strong periods going back decades.

We may have already seen the bottom. And the first piece of evidence is how much more fundamentally healthy the market is looking right now…

The Market Is Getting Healthier

Before we showcase today’s powerful study, let’s first review the recent market landscape.

You’ve likely heard the old adage, “Sell in May and go away.” 2023 is the following this playbook to a tee.

Since May, the S&P 500 has effectively gone nowhere with a flat return of 0.62%.

If you recall, stocks surged into late July only to give all of those gains away. You can see that below in the chart:

Source: Yahoo Finance

But this only reveals a small part of what’s really happening. When you dive below, you’ll see how broken most stocks are.

As of today, just 19% of companies in the S&P 500 are trading above their 50-day moving average. That’s up from the 6% on October 1. This is still lousy, shows that the market is getting a lot healthier.

Remember what happened in early October? Back then, the media was harping over the destruction in the utilities sector. Utilities stocks were so washed out, I pounded the table on them as a deep value play.

Many of those names have started recovering, helping the small improvement in breadth lately:

Source: Barchart

To say the market is oversold is an understatement.

But when you review history, you’ll notice that May kicks off a trying time for stocks…eventually spilling over into a buying time for stocks that we’re entering right now.

Sell in May and Buy in November

Today’s study proves that the phrase “Sell in May” actually holds a lot of merit.

Going back to 1987, the 6-month period of May through October represents some of the most lackluster results you’ll see.

On average, the S&P 500 gains a modest 1.97%. That’s 37 years that suggest you may want to Sell in May.

However, as usual, that’s only half the story. Because November–April trounces those returns with a 6.47% average bump:

Not only does your win rate increase to 75%, the 6-month period, starting right now, more than triples the prior period!

When you couple the historical evidence with the fact that most stocks are extremely oversold, you’re mixing a cocktail of explosive upside ahead.

I don’t have a crystal ball and can’t possibly know the future. But what I do have is a plethora of signals aiming at better days ahead.

If we should “Sell in May and go away,” it’s clear we should also “Always remember to buy in November.”

Now’s one of the best times I’ve seen in a long while to begin shopping for stocks.

Don’t let fear keep your portfolio on the sidelines. The odds point to the makings of a rally beginning soon.

Stack the odds in your favor and you’ll win.