I’ve read several articles in the mainstream financial media that have claimed that Sell In May was a bust trade this year. That’s not true.

The mainstream media uses the major indices to gauge overall market health. The Nasdaq and S&P 500 does not reflect what is going on with the broad market. According to the mainstream media, if the S&P 500 is up, then it’s a healthy market.

As active traders, we know the real story. Sell In May has worked great this year. I know several traders who run stock picking services that took huge losses after May.

While the action in the major indices is positive, there has been weaker action under the surface. The most obvious illustration of this dichotomy is the Nasdaq near all-time highs, while the number of companies hitting new 52 week highs has been falling.

Nasdaq index versus underlying market action of breadth.

There are a few mega-cap stocks like Apple and Amazon that are propping up the major indices.

There is crazy sector rotation going on below the surface. Check out the week-to-week sector performance over the last month.

Weakness in some sectors are offset by strength in others. The strong sectors one week are the weak sectors the next.

That’s a crazy high level of rotation that often occurs before market corrections. You’ve probably heard the old cliche that volatility increases at market tops.

You can’t really use the major indices as accurate gauges of overall market health or trading profitability. If the mainstream media was correct in their assessment that Sell In May was a bust this year, then why are the majority of traders down in their trading accounts over the last few months? Just because the major indices are up, it doesn’t mean that most retail traders accounts are up.

Bottom Line: Right now, trading is tough. The number of stocks making strong moves has plunged and price action is increasingly choppy. Fewer and fewer stocks have good follow-through once they move higher so do NOT chase anything in this market.