Make or Break Time
The markets have been in flux the last couple of weeks. I feel we are at a make or break time for the general trend of the market. Yesterday the S&P 500 was trying to close above the 200 day Moving Average but it failed. A close above this level will give me good reason to start investing some money again. Today the markets are down again and when you look at the S&P the 1210 level looks to be some solid resistance.
People may wonder why I'm so concerned about the very short term trend of the stock market when my time horizon for these investments is so far out into the future?
Well my reasoning is that even though I'm using a buy and hold methodology for these stocks, the key is to buy them at a cost basis as low as possible. When the general market trend is down, all stocks tend to go down as well. It's the old stock concept of all ships rise (or sink) when the tide comes in (or out.)
Also just like everyone else, I have set aside a specific amount of money I want to invest in these stocks. So I can't just keep buying to lower my cost basis over the coming months and years. I will quickly run out of money using that methodology. When I'm buying I look at the short term picture of the general stock market to see if now is a good time to invest in general. I then look at the short term trading patterns of the individual stock to see if it is an ideal time to buy that particular stock.
When I want to own a stock I decide how much of my total portfolio I want to own in the company. I will then leg into positions buying a third at a time so that I can start a position and still have money left over to purchase more in the future at a hopefully lower cost basis. This all assumes that I feel the stock that I'm buying is a solid company and I have good prospects for this stock to be a real winner in the future.
Right now I still feel uncertain about the general trend of the market. So I will continue to wait and keep researching new companies to add to the watchlist. Many of you have been sending me e-mails with new stocks to add and research. I would like to thank everyone that has and I look at everyone of these stocks for inclusion into the watchlist. So keep them coming.
I also wanted to apologize for the lack of posts recently. The workload at both my work and also side businesses has really picked up the past couple of weeks. This should be ending soon and I will be able to dedicate more time to this site.