|
Is This The Beginning?
Market Recap (11/19/2012)
Index Close Day Chg Day % Chg YTD % Chg
DJIA 12795.96 207.65 1.65 4.73
NASDAQ 2916.07 62.94 2.21 11.93
S&P 500 1386.89 27.01 1.99 10.28
10 YR BOND 1.61 0.04 2.55 -13.90
Could today's market action be the beginning of the year end before the fall off the fiscal cliff rally? It could be, but I am not so sure. Mr. Market believed more lies about a Greek bailout and had its toes and pinkies crossed that we will have a solution to our debt problems by year end.
Everyone who believes that raise their hand or stand up. Yeah that's what I thought.
Now who am I to judge. I said we would see a disappointing existing home sales number today with a half a point drop. Well the number was greatly better than expected and Mr. Market was doin happy dance today.
I got everybody out of AAPL just in time to see a 37 point gain on the stock. Intel was up a teeny time bit after announcing the retirement of its CEO. Could it be the chip maker has bottomed? MSFT was up almost a full point today. Could it be time for us to add to those holdings.
If you are picking up on a trend, here, think back to the first week of October when we suggested that maybe some of our stocks had hit a peak. We suggested you keep an eye on your stops and be ready to take some profit.
All we are saying now is you have had 6 weeks to clean up your watch list, you should have some cash to deploy, so redo your homework on your favorites. It could be getting close to "Gat Back In The Game Time."
It would have been nice to see heavy volume with a 2% up day like today, but we just checked the numbers and the volume was not there. The numbers were a bit cloudy because Friday was option expiration day and that always pumps up the volume.
Today's volume was more indicative of traders looking to get out of town on a short week. Unfortunately, it was not a sign that institutional buyers are looking to make a steady commitment to the market.
In your plans for the balance of the year, we were reminded about wash sales. Here is a little reminder and a trading strategy you might want to read more about.
Rinsing The Wash Sale
If you recall we have gotten burned in the past with wash sales. Years ago, if you were long a position and taken a bath on it (meaning that the stock was significantly lower than your entry point) you could, say at the end of the year, sell the stock. Take the loss, and then the following day, even if it were the next tax year, buy back into the stock, and own it at the new lower price.
The IRS caught on to that scheme and instituted the "30 day wash sale rule". You must wait 30 days before buying the same stock after you have claimed the loss or the loss is applied to the repurchase.
Example. Let's say you are enjoying the Holidays and you see you are down 25% on your IBM stock. You bought it at 125 and its now at 100. You are thinking it would be nice to have your IBM at 100, but don't have the capital to own 200 shares.
After checking your tax situation you think you could enjoy the loss this year and get back into IBM at 100 a share. If you do that via a sale and a repurchase, The IRS will make your broker carry forward the loss into the new purchase. Trust me I know as I have accidently done this twice.
However, and verify this with your FA and your tax person. You can take the loss on IBM, and turn around and sell a put option at a strike price near the current price of 100 that is at least 30 days out and you will have accomplished the same thing. That is according to IRS revised ruling 85-87.
You must be careful of the timing and the strike price. If you sell the put deep in the money, say 110, you could get stung in a wash sale rule. If you sell at or out of the money, you might be OK. Again check with your tax person and FA.
I know you are thinking, wait I can just buy a call option and it will accomplish the same thing. Again, check with your tax person, but the IRS is not lenient on call options on the same equity.
Rev. Rul. 85-87
Salve Lucrum
| 
Since 10/10/2012
