What about a neutral based strategy now? The “Summer Doldrums” are typically the time to at least consider the notion.

Could this be the time to utilize a neutral based strategy such as an Iron Condor strategy? After a rough patch during the March and April options expiration periods, May and now the June option expiration period have turned things around. Is it a coincidence that the seasonal favorite and old Wall Street adage kicked in right around this time.  

How about the “sell in May and go away” theory now? I know, I have mentioned it repeatedly over the past few weeks, but for good reason. After the huge rally that the market has experienced over the last several months there is certainly no better time for a month long consolidation or trading range than the period known as the “Summer Doldrums”.  

The adage typically begins on the fourth trading day of May due to the bullish seasonal tendencies that surround the end/beginning of most months.

) closed the day at $151.84, up $1.09 or .72% since the old Wall Street adage “sell in May and go away” began.

As you can see from the minimal gains above the S&P has found a comfortable trading range over the past few weeks. I would like to go back to some statistics that I have referenced several times over the last few weeks.

 I looked at the historical average return of the S&P on a monthly basis over the last 60 years to see if actually backed up typical range-bound summer months also known as the “summer doldrums”.

Jan. – 1.4%

Feb. – (-0.2%)

Mar. – 1.0%

Apr. – 1.3%

May – .0.3%

Jun. – 0.2%

Jul. – 0.9%

Aug. – 0.0%

S&P. – (-0.6%)

Oct. – 0.9%

Nov. – 1.8%

Dec. – 1.7%

Again, the Stock Trader’s Almanac states that a $10,000 investment compounded to $544,323 during the November-April period over the last 56 years compared to a $272 loss for May-October. I think that sums up the significance of the historical period known as the “Summer Doldrums”.

Again, keep this in mind as we move into the summer months. Corrections happen. Flat periods happen. The market can’t continue to advance in this manner without corrections and lengthy consolidation periods. This is the nature of the market.

Want to learn more? Our White Paper give a detailed account of what is needed to trade an Iron Condor strategy successfully. Buy the White Paper today and you will receive two free months of our newsletter.

Consider learning alternative investment strategies as a way to diversify your current portfolio so that you are better equipped in any market environment, bullish bearish or neutral.

Overbought/Oversold levels for June 6, 2007