Tuesday, December 25, 2012

Holiday Trading

The end of the year usually brings us joy, laughter and good times.  For the most part trading slows down this time a year, sure there are strategic moves that can be made as well as those who believe in the January Effect.  Although retirement accounts that are tax sheltered may reduce the need to sell to get a tax credit, uncertainty with dividend tax rates may bring last minute selling.  In the article written by Jay Kaeppel his chart reveals the cumulative % gains from buying the Dow on the 3 days before and 3 days after a major holiday.  A major holiday includes the 9 holidays in which the NYSE is closed 2 being Christmas and New Year's Day.  Overall trading during the holidays looks pretty attractive and profitable.  Enter December 2012 had you bought the Dow (DJI) on the 20th of December you would have experienced a slight gain followed by two days of drops but of course there are still another 4 days to go which inter lap with the New Year's Day trading period.  If the opening bell tomorrow brings gains then buying on the 21st/22nd would have been a good idea. 

Let's get realistic we are not talking about the usual Christmas Day trading session here, we are near the edge of a fiscal cliff. When the fate of the stock market rides on a major decision that could take us back to a recession one has to consider if staying out of the market's way is best. Investing during the fiscal cliff fiasco is the equivalent of rolling a pair of loaded dice as you don't know what you are going to get "Grand Bargain Shrinks as Congress Nearing U.S. Budget Deadline" and you don't want your money to be on the wrong side of that bet.
Then there are those investors that consider the (^VIX) to be a market indicator.  On Friday the VIX hit 19 for the first time in December, the index indicates fear it likes to rise as the market falls.  When comparing the VIX, Dow and the S&P 500 (^GSPC) the link shows how the VIX tends to be lower when the market is rising and it creeps upward when the market is dropping.  There are times when the market and the VIX do not prove to be as reliable, during 2007 the S&P was making new all time highs yet the VIX did not make new all time lows.  If you are young and planning to buy for the long term buy stocks with out panicking.  If you are not a high income earner including baby boomers buy yourself the high yielding stock (JE) for the holidays and hold onto it ... go ahead why don't you?
Stock futures are currently in the red, Obama is in Hawaii with his family spending Christmas and the little drummer boy beats his drum so the beat goes on da da dum da dum ...


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