If You Have A Profit, Sell Into Any Strength.

Dow +258.30 +2.94% 9,034.69
Nasdaq +55.18 +3.50% 1,632.21
S&P +28.55 +3.16% 931.80

If You Have A Profit, Sell Into Any Strength.

01-02-09 Rally – this is so great, we all wanted to start 2009 with a decent rally and I must say that we managed to manufacture one. Obviously, it is the new year and stocks have gotten so beaten up that one would not have any problems putting some money to work in the markets hoping that 2009 will end up on a positive note. Additionally, shorts continue to cover their positions afraid that there will actually be a continual rally. There are a number of money managers with large cash positions and these folks also have to buy stocks for their clients as the alternatives out there are not that attractive (e.g. bank’s interest rates, t-bills, certificate of deposits). Historically, nothing has beaten the markets. And if history holds any truth the markets will eventually recover as the strong, innovative companies will come up with new products, stimulate consumer interest (again), the consumer will also eventually spend money on new products and services, those innovative companies will make profits (again) and as we all know (aside from speculation) the one single thing that guarantees stocks to move up is profits.

With this in mind, there are very few strong, innovative companies making a profit nowadays, the average consumer (and non-average consumer for that matter) has cut down on spending, companies have also trimmed down their expense budgets, the housing market has a few years to go, credit is extremely tight and consumer and market confidence is simply not present yet. The overnight fed rate of .25 not withstanding, most folks do not have access to cash via new or old credit lines. Home equity is a thing of the past and the long anticipated bailout money will not make it into the consumer hands for another long year, that is, 2009!

So as the future of the markets is not that great overall, you may want to secure every single profit you make on a day-by-day basis until we really see the DOW, NASDAQ and S&P 500 break through critical technical lines with heavy and positive volume. Remember that no market goes up or down in a single straight line – play up and down as you see fit.

This is not scientific research and writing - just a little bit of common sense.

Stocks to watch for the week of 01-05-09: MOS, GPN, MON, APOL and SCHN - these stocks are right for experienced option traders as significant swings are anticipated after earnings.