Saturday, July 31, 2010

The selling itch

It looks like the market is in a shaky place again. From here on it could be headed in either direction and the people who call it right will surely feel smarter than the others. But it is in moments like this that you begin to get that itch to take all your profits and run from the market least it becomes schizo again and take you down with it.

But here is a thought. The market has moved from 6000+ to 11,000 and no one believes this is sustainable. There are some who believe the market may go higher, but those people are far and few. The real money will be made when the market moves further up from here because that is when the skeptics will feel like they have missed the boat and start coming in in droves. This is really the point to which you need to stick with the market.

As an example, 2002-2005 was a period of great uncertainty in terms of market volatility. People who stuck it through those times had a nice upside waiting for them on the other side of 2005. I

The caveat here is that it all came down in 2008 but people who traded between 2005 and 2007 with holdings that were built between 2002 and 2005 made hay. when the market gets to this point, it is time to look for an exit. The hard part is telling when would be a good time to call it quits. I would say a 20% upside from here and we will make believers of the market watchers and from this point on the market will start building froth.

So here is the call, hold on till Dow 13500, Nasdaq 2700 and S&P 1300. Build on top of your core holdings every time the market slips before that. Once at that point start looking for the exits. When you see a 10-15% upside from that point is the time to start selling excess holdings and trimming back to core holdings.

Until then just put some ice on that itch and ignore it, cause it will cost you dearly to get out at this point.