BofA: These 4 Charts Will Tell Us If We Should 'Sell In May And Go Away'

mary ann bartelsMary Ann Bartels

Photo: Bloomberg via YouTube

“Sell in May and go away” is an old stock market adage that worked great last year.But you’d be ill-advised to just blindly follow this arcane rule of Wall Street.

In her recently published 102-page chart portfolio, Mary Ann Bartels identifies a couple charts that she believes will be useful in making a decision to sell.

“To help us gauge the risk of a sell in May and go away year, we are tracking four safety check list charts,”  wrote Bartels, Bank of America’s top technical research analyst.

NYSE Stocks Only Advance-Decline Line

'The NYSE stocks only advance-decline has strengthened, but has not yet broken out above the 2011 highs. A failure to sustain a break above last year highs in coming days/weeks would provide a warning for the broader market rally.'

Source: Bank of America Merrill Lynch

The Dow theory

'With both the Dow Industrials and Dow Transports above their late October 2011 highs the Dow Theory is on a Buy signal. This buy signal occurred on 23 December 2011. The last sell signal from early August 2011 proved to be a whipsaw signal. Based on the Dow Theory, the primary trend for the US equity market is up. While there is a non-confirmation in place since early February, a non-confirmation is NOT a Dow Theory sell signal, but it is a warning for the buy signal generated in late December. To generate a Dow Theory sell signal, it would take a decline below the 25 November lows for both the Industrials and Transports. It would take a breakout in the Transports to re-confirm the buy signal.'

Source: Bank of America Merrill Lynch

KBW Banks Index

'The KBW Banks Index (BKX) is tactical market leadership that was up 26% in 1Q12 vs. 12% for the S&P 500. The BKX has tested initial resistance near 50, but additional upside toward 55-58 is not ruled out. Support is developing in the 45-42 area. Relative to the S&P 500, the BKX is tactical market leadership.'

Source: Bank of America Merrill Lynch

Investors Intelligence % Bears

'Our favourite sentiment indicator is Investors Intelligence % Bears. This indicator is not yet contrarian bearish. Below 20% would indicate too few bears and generate a contrarian bearish reading for % Bears and increase the risk for a deeper market pullback.'

Source: Bank of America Merrill Lynch

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