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It’s May, and That Means It’s Time to Sell: Jeff Hirsch

Jeff Macke
Breakout

Jeff Hirsch, editor of Stock Trader's Almanac and the recent book "Super Boom: Why the Dow Will Hit 38,820 and How You Can Profit From It," dropped by Breakout's set to discuss the wisdom, or lack thereof, of the old Wall Street saw to "sell in May and go away."

By the time most chunks of insight become accepted enough to be considered conventional, it's too late to profit. So is it time to book whatever gains you've made in 2011 and work on that slice (or in my case rip-hook drives and abhorrent short game)?

Hirsch offers a qualified yes. "I wouldn't take any long positions here," he says. Instead, he would sell down positions in market ETFs such as the Spyders (SPY) and the Dow Diamonds (DIA).

His view is based as much on the present as it is on market history. With the S&P 500 up over 8% year to date, Hirsch feels financial discretion may be the better part of valor. When I point out that, according to Hirsch's own almanac, three of the last 10 periods from May to October (the month when traders are supposed to reinvest) have been positive, he notes more longitudinal studies supporting the idea of an extended vacation.

So what to do if one isn't inclined to get entirely out of stocks, but is looking to protect some gains? Hirsch says he's had success moving some funds into bonds, as well as bearish funds to effect a more neutral equity stance, without ditching an entire portfolio.

The always interesting Friend of Breakout makes more interesting points. Let us know your thoughts in the comment section, or drop us an email at breakoutcrew@yahoo.com.

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