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Tuesday, June 08, 2004
Good evening friends,
Market Recap
There was not much action in the markets as the Dow closed up +41 points, NASDAQ gained only +3 points, and the S&P gained less than +2 points with volume very light once again. To the average investor today's move means little to them. All they see is the NASDAQ up a measly +3 points. On the surface it was a ho-hum day for sure, but looking behind the scenes, things look positive. The average investor would fail to notice that all three of these indices closed at their highs for the 2nd consecutive day. This is very positive action in deed.
A Closer Look
I mentioned last night that I wanted to see a close above the trend line on the NASDAQ today accompanied by volume. We did not get the volume, but we did get the close above 2020 I was looking for. It is hard to say if this close is the real deal, because we are not getting the heavy volume to confirm the move up. This lack of volume may be contributed to the slow summer season. Normally this close on the high with low volume would give me mixed signals but I will take it as a positive and attribute the low volume as part of the summer effect. Speaking of summer, I would like to talk a little tonight about the seasonal effect on volume that summer brings and why and how you should plan for it.
Sell in May and Go Away
The saying “Sell in May and go away” comes from the traditional sell-off that happens before summer starts. Looking back at the data that has been collected to track the market performance from month to month shows June as being one of the worst months for stock performance.
Maybe this is because June is when kids get out of school and families plan vacations to leave for two or three weeks. People just get away and they cannot be in the markets. This results in low volume, and when there is low volume, markets tend to drift down. July is another month of vacation time, especially the week of and after the 4th holiday. Expect low volume then as well.
Looking After Your Portfolio
As we enter the summer months, I realize that a number of you are likely to be taking vacations. You may have very limited access to the internet and your portfolio, or no access at all. One of questions that I receive most often when someone is planning to be away for a while is, “what should I do with my portfolio while I'm away?”
That is not an easy question to answer but the safest play is to go to all cash. I would certainly NOT be short while having no access to my account. Playing it long is risky but could play out well with proper planning.
If you sell and go to cash you will be safe, but you will also not make any money if the market happens to rally in your absence. You could come back and find out that one or more of the stocks you sold doubled while you were gone. On the other hand, if you hold, you could come back to find one or more stocks down by 50% because of bad earnings, a down grade or some other bad news. So, what do you do?
For me, if I had no access at all, I would sell everything and go to cash. The market will still be here when I get back. If the market rallies while I am gone, all I have lost is opportunity, but the great time I just spent with my family more than made up for the opportunity lost.
If you decide to hold your positions, I recommend the use of a stop loss orders. If you have some access to the internet, (for example. computer in the lobby of your hotel, or a local internet café) you might choose to set up a stop loss based on the charts. Log in each evening, and check the charts on each of your stocks. Look for support and resistance areas in each chart, and then determine where best to place your stop loss for the following day. If you can identify key levels of support, you will be able to position yourself for each trading day.
Another choice if you have absolutely no access is the trailing stop loss. Some brokers allow these. If your broker allows them, you can specify the amount you wish your stop loss to trail, either percentage or by an actual value. Once setup, there is no need to check every night. You set it once and then let it go. If your stocks are on the rise, let them run with your trailing stop in place to lock in profit if the stock or market should pullback. It is not the best way to trade, because it can take you out of a good position on the slightest pullback. However, if you want to remain in a position knowing you can not check it for days, it is about the best thing you can do.
So take your vacation and enjoy your time away with your loved ones. There is no reason to fear or worry about your stock positions if you have a good plan.
As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all tomorrow evening.
Reminder: No Bulletin on Thursday Night
The markets will be closed on Friday, June 11 to pay respects to former President Ronald Reagan. Because the market is closed on Friday, there will be no Bulletin Thursday evening.
OTC BB Watch List
- SEVI: A high of .89 today. That's up 50% from our listed price just two nights ago.
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