If you sold in May, it's time to start buying again, says the Stock Trader's Almanac

Published Thu, Oct 12 202310:36 AM EDTUpdated Thu, Oct 12 20232:32 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

It's time for investors who follow seasonal patterns to jump back into the market, now that a key technical indicator is flashing buy, according to the Stock Trader's Almanac. A Monday evening note from Almanac editor Jeffrey Hirsch said the stock market appears to be in the early stages of an end-of-year rally. "Our seasonal-based research throughout the year indicated Q3 weakness followed by a market turn sometime in late-Q3 or early Q4. This rebound appears to be getting underway despite the apparent increase in uncertainty," the note said. The autumn advance is the flip side of the old adage "sell in May and go away." The pattern didn't work this year, as the S & P 500 is up from where it was in May, but stocks did lose some steam late in the summer. SPY YTD mountain The S & P 500 is up since May, but did suffer a late-summer swoon. Beyond seasonal patterns, there are also technical indicators that suggest the market has found its footing once again. The Almanac note this week showed that the moving average convergence/divergence indicator, or MACD , has now turned positive for the three major market indexes. The MACD is a momentum indicator that uses exponential moving averages in an attempt to identify whether a small change in direction is likely to expand into a larger rally. The buy signal could help offset the multiple negatives working against the stock market, including bond yield volatility and the conflict in the Middle East. "Make no mistake headwinds remain numerous, and volatility is likely to persist in the near-term with some back fill of recent gains a possibility. But the market is forward-looking, and the Q3 pullback has likely run its course. Seasonal factors have been well-aligned throughout the year. Though never a certainty, we will stick with the system and begin establishing new long positions in the ETF portfolios," the Almanac's note said. The Almanac's portfolio changes show an expectation of a broad market rally. The moves include buying the SPDR Dow Jones Industrial Average ETF Trust (DIA) , SPDR S & P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) as well as the iShares Russell 2000 ETF (IWM) . On the sector front, the Almanac's moves are also wide ranging. The funds listed as new additions in the note include the SPDR S & P Biotech ETF (XBI) , Consumer Staples Select Sector SPDR Fund (XLP) and Vanguard Real Estate Index Fund ETF Shares (VNQ) , among several others.