Simple update for today and what to watch for tomorrow. According to Sentimentrader.com, 94% of 2010′s gains came on the first day of the month and 61% of the entire rally was due to a gap-up to open. That means if the trend continues, we can expect tomorrow to gap-up strong and potentially a little bit more towards the close but, the rest of the month is unlikely to net us more gains. That would mean the best strategy is to take some off tomorrow and look to reinvest.
My strategy is very simple. If we gap-up tomorrow and the trend looks to resume, I will take some off the table and go towards a higher level of cash. Since the markets have been acting irrational and overemotional lately, it is a wise move to keep smaller positions anyway. This will allow more flexibility and more pain tolerance since I have more cash to invest on any drop. With POMO behind us, I do not expect any drop to be catastrophic but, I can not rationally expect the markets to continue to run up and up after the red flags we have recently seen. Stay tuned, the week will be interesting, to say the least.
Have a good night and I’ll see you in the morning. Good luck out there.
Mike
No positions mentioned
