Thursday, May 29, 2008

END OF MONTH BIAS

Is almost always to the upside as funds square away positions and try to get long the stocks that have done the best during the rest of the month. Its a mini Window Dressing time.

This mini rally we have doesn't look very strong, next week will be very telling as far as where we're headed. I just don't see us going much further to the upside without a decent size pullback, but hey, the market can buck that idea in a hurry. I still say CASH is king here until we get a clear direction. I always try to teach clients that there really is very little advantage to holding a position overnight, unless you can't watch your stocks, or can't trade altogether. Think about it, if you trade out of everything every day and start fresh you can get status as mark to market (check with your acct on this*), you can miss all the big drawdowns to start a day, those panic pains when you watch a stock you own get bad news and crumble, or the whole market tanking. The only thing you may miss is a huge gap up, or news that comes to push it way higher. But, if you average it out, you are probably better off just selling everything at days end and rebuying the next day.

Oh, you do lose the capital gains benefit if your stock appreciates significantly, that is true. But, in my view, I like to be mostly cash end of day, with some position stuff leaning one way or the other depending on what's being set up, or if its a swing trade for a specific trend where I do feel that there is a high probability that the stock will gap up during that phase more often then not. Say you are buying GOOG calls into earnings, GOOG tends to gap up a lot during that time frame, so you may not want to sell those calls every day, you may want to hold them. But, generally speaking I like to sell at days end and restart. It's hard to recover on a day when you are wrong to start the day and down a lot because of stuff you held overnight. Far too often I see (and I've done it myself) people then chase the loss to start the day on their swings and end up doubling the loss and feeling dumb.

Friday is last trading day of the month. Again, usually a bias to the upside, but one thing to keep an eye on is that the Nasdaq is sitting right at 2500. Thats a key resistence area. A clean break would potentially send us a lot higher, but a clean break DOWN and failure up here could lead to a bigger drawdown in the market.

Today I called V calls, the $80s. I'm not crazy about being long or short here on much, but with MA moving the way it did the thinking was/is that V can see new highs and try for $100s shortly. We'll see, its a very small play, no harm, no foul.

Next TUESDAY at 9:15 to 10:30 we are having a FREE class for ALL so we can show you some nice techniques to help your daily trading, and also to sell you all on the idea of coming to the NJ 7-day Live seminar. If you have any interest in that, email me - waxie@Trendfund.com and I'll shoot you some info!


See ya all tomorrow!

RULE!

Michael "WAXIE" Parness

2 comments:

Thomas said...

Waxie - If pathetic home builder stocks can form a short-term bottom the way they're doing, then going long V doesn't seem to be high risk. I was a manager for Toll Brothers (TOL) and luv trading the builders. HOV is almost a sure bet on some days. Builders aren't good unless financials are good. Looks like financials are up for the next two weeks. They've got both positive momentum and the sentiment has reversed. The S&P and Naz Composite are confirming the same action too.

Waxie said...

thomas, could very well be. I'm not very bullish here, but it could be a case where we reverse the weak. That would mean that 1st week of June we'd get a pop in the financials and potentially the home builders. This week you're seeing the hot get hotter and the cold lag badly. V, eh. I mean, I like the idea of cash here and trade day to day, I don't see us rushing anywhere at this point either way.