EB Monthly Seasonality Report - May 2024
A Look Back At April Stocks:
One month ago, we provided a list of the Top 20 stocks that had strong historical track records during the month of April. Here are how they performed in April 2024 (through Tuesday, April 30th at 10:30am), in order of best to worst performance:
- WAB: +12.12%
- EQT: +10.36%
- AXP: +4.46%
- PXD: +3.86%
- DVN: +3.69%
- FANG: +2.74%
- AMZN: +0.09%
- EXPE: -1.23%
- BKR: -1.94%
- DFS: -2.77%
- MRO: -3.74%
- TTD: -4.03%
- PFG: -7.10%
- LULU: -7.80%
- HST: -7.98%
- SNA: -8.53%
- CE: -8.98%
- BLDR: -10.37%
- META: -10.55%
- ALGN: -11.15%
The percentages represent the returns from the March 28th close to the April 30th (today) intraday price as of 10:30am ET. The average performance of all 20 stocks (-2.44%) slightly outperformed both the S&P 500 performance (-2.81%) and the NASDAQ 100 performance (-2.91%). Our biggest April winner was WAB, which reported blowout quarterly results on April 24th, beating revenue estimates by more than 6%. Earnings also came in well ahead of expectations at $1.89 vs. $1.49 consensus estimates. After 7-8 years of sideways consolidation, WAB broke out in late 2023 and it's been a solid advance since then. Check out its long-term chart:
WAB is overbought, but other than a temporary pullback, it appears poised for further price appreciation ahead.
Keep in mind that these Top 20 stocks are provided every month based SOLELY upon historical tendencies. It's up to everyone to decide if strong seasonal stocks warrant a trade after considering the overall market environment and the specific technical conditions present for each stock.
S&P 500 May Performance
Here's a breakdown of the annualized performance of the S&P 500 (since 1950) during the month of May:
- May 1-5: +29.94%
- May 6-25: -12.10%
- May 26-31: +37.27%
The numbers don't lie. May usually starts off well and ends well. But the middle part of the month seems to be lacking. Growth tends to perform extremely well, especially during the current secular bull market since 2013. Check out the SPY's relative performance vs. the QQQ over the past 12 years:
That May through August period clearly favors the QQQ (growth). If you add the average monthly underperformance above from May through August, you'll find that the SPY underperforms the QQQ, on average, by 4.5% per year since 2013. That's massive and I believe it's important to understand this secular bull market reality.
Sector Performance
Before we look at individual stocks, let's get an overview of how the various sectors and industries have performed during May over the past decade (during this secular bull market):
Last month, as we headed into April, I talked about the historical outperformance we'd seen since 2013 in the energy (XLE) and materials (XLB) sectors. These two groups tend to perform well in April. Here's a 1-month sector summary, showing us how these two groups performed in April 2024:
It wasn't exactly according to historical plan, but the XLE was near the top and one of only two sectors that moved higher in April.
So what might we expect in May?
Technology (XLK) and communication services (XLC) tend to lead the way, outgaining the S&P 500 by an average of 1.9% and 1.4%, respectively, during May over the past decade. Here are the XLK's relative performance numbers since 2013:
Since 2013, May has been the BEST calendar month for XLK outperformance, yet the masses believe "Go Away in May" is the stock market's equivalent of Santa Claus and the Easter Bunny. Look again at those monthly relative strength numbers. May through August totals 4.7% average outperformance, while September through April totals 3.1%. Again, do we want to go away in May?
Industry Performance
Let's focus on the strongest sector in May, which is technology (XLK). Within the XLK, the only industry group that has a secular bull market history of lagging the S&P 500 in May is computer services ($DJUSDV). The other 7 all outperform. The leader by a mile, however, is the semiconductor group ($DJUSSC). On the long-term weekly chart, the DJUSSC just made a nice kick save off its rising 20-week EMA:
A lot of market pundits try to call the demise of the semiconductors at every turn, but betting against this group has been extremely costly. The above chart shows that when the DJUSSC is rising strongly, we should respect 20-week EMA tests. We just had one a week ago and you can see the bounce quite clearly. Personally, I believe semiconductors will have another strong rally from now through summer.
Here are all industry groups that tend to perform much better than the benchmark S&P 500 during May:
Technology (XLK):
- semiconductors, renewable energy, computer hardware, software
Consumer Discretionary (XLY):
- tires, toys, specialized consumer services, home construction
Communication Services (XLC):
- internet
Industrials (XLI):
- building materials & fixtures, business support services
Financials (XLF):
- full line insurance, mortgage finance, specialty finance, insurance brokers, consumer finance
Health care (XLV):
- health care providers, medical supplies
Consumer staples (XLP):
- none
Real estate (XLRE):
- none
Utilities (XLU):
- none
Energy (XLE):
- coal
Materials (XLB):
- none
Stocks for May
We've selected our Top 20 seasonal stocks for May. Several names represent sectors and industry groups that have been discussed above. Others simply stand out in May based on their own historical track record.
The stocks this month, with average May performance, are as follows:
- SMCI: +11.4%
- CZR: +10.1%
- MNST: +9.1%
- LYV: +8.7%
- TMUS: +8.4%
- AMD: +8.4%
- NVDA: +7.3%
- AVGO: +7.2%
- EPAM: +7.0%
- MRVL: +6.8%
- ON: +6.5%
- MOH: +6.5%
- NFLX: +6.5%
- ENPH: +6.4%
- MCK: +6.4%
- VRTX: +6.2%
- TTWO: +6.1%
- CPRT: +5.9%
- EA: +5.9%
- CNC: +5.3%
A "Seasonality - May 2024" ChartList (annotated with 1 or 2 support levels to watch) will be created and will be available for viewing/download later today or tomorrow. You must be a StockCharts.com Extra or Pro member to download our ChartLists. Basic members and non-StockCharts.com members can view the charts one at a time.
Happy trading!
Tom