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Thursday, April 22, 2004
Market Recap
There was a powerful rally today on Wall Street as investors continue to be blown around in every direction, like a feather in a whirlwind. We are seeing the markets bouncing back and forth daily - short or long it is hard to make money in a market like this. The good news about today's rally is that the NASDAQ closed above its 50 SMA, and even better news is that this rally was on the strongest volume we have seen in a long time. A rally on strong volume is always a very good sign.
Good Earnings
Earnings of most companies continue to beat street estimates: MSFT, AMZN, AMGN, GILD, BRCM (today), EBAY (yesterday), and QCOM (yesterday). These are heavy hitters and they all had great earnings, many others are also beating street estimates. Sooner or later this market will have to recognize these good earnings and reflect it in the indices.
I think today's action in the market might be the first sign that the market has finally decided that good earnings do mean something and it is time to start buying or get left behind. One rally does not make a market but today's volume was enough to get my attention. The charts still need work, but this volume the last two days cannot be ignored. If this is truly the start of another leg up, then this is a perfect time to re-evaluate our portfolios.
Spring Cleaning
This is the time of year that everyone starts their spring cleaning. Things that have been lying around for a while get taken to the curb; it is a time to start over fresh. Portfolios need cleaning once in a while as well. Most traders will hold onto their losses and sell them in December; it is called the tax write off. They will take their losses in December to offset their gains over the course of the year. (Mutual funds tend to do the same thing, but in their case, it is called “window dressing”. They will sell off their major losing stocks and buy the big winners of the year. This action makes the prospectus look nice, but it is not reality.)
Do Not Put Off Loses
We do not have to wait until December to get rid of losses. Here is why: if you sell a stock earlier in the year and put that money to work elsewhere, you may have capital gains instead of a capital loss by holding that loser! Many people hate to pay capital gains tax so they will try to load up their losses to prevent themselves from having to pay capital gains.
I love paying capital gains tax, and the more I pay the better. It means I am doing well in the market. Yet, most investors will do whatever they can to avoid paying that tax. They do not see the gains behind it; just the avoidance of the tax is all that they are concerned with.
Let's Spring Clean Our Portfolios
Do you have stocks that will be on your December sell list? If there is no hope of a recovery for the stocks, they should be sold. TPPP is one I own (and I would love to sell the loss and put the money else where), but the volume on the stock is so low that I can not sell my position. I will have to wait for a big volume day to sell.
Why not take a few days to ponder your own portfolio and determine which stocks are old and useless and sell those positions. Put the money to work where you can actually make something. Remember, we are striving for the biggest capital gains tax payment we can muster!
OTC BB Watch List
- DNYY (still can not figure out why this is not on the NASDAQ)
- COPY
As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all Sunday evening.
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