Friday Charts: Market Timing and the Biggest Driver of Stock Prices in 2013
It’s Friday in the Wall Street Daily Nation. And longtime readers know what that means…
We’re taking a break from my typically long-winded commentary (keep the hallelujahs to yourself).
Instead, we’re cherry-picking a few graphics to convey some of the week’s most important economic and investing insights.
Or more simply, we’re going for less talking and more graphics. So let’s get to it…
Let’s Pretend Market Timing Works
I’m convinced that day traders eke out just enough profits to keep feeding their addiction. In other words, market timing isn’t a wealth-building strategy.
But if you’re dead set on trying to be the exception to the norm, here’s a helpful hint: Do all of your buying on Mondays and Wednesdays. And do all of your selling on Tuesdays and Thursdays.
Why? Because stocks sell off the most on Monday and Wednesday. And they rally the most on Wednesday and Thursday, according to Bespoke Investment Group.
Stocks also sell off the most frequently on Mondays and Wednesdays (51% and 48% of the time, respectively). And stocks rally the most often on Tuesdays (52%) and Thursdays (57%).
So say sayonara to “Buy low, sell high,” and replace it with “Buy Monday (or Wednesday) and sell Tuesday (or Thursday).”
So much easier to remember, isn’t it? Good luck!
Show Me the Earnings Growth!
You’ll recall that yesterday I boldly predicted that the bull market is going to continue into 2013. (I know, the gall!)
For that to happen, though, it’s time for 490 companies to start carrying their weight.
So far this year, 10 companies accounted for more than 80% of the marginal profit growth for the entire S&P 500 Index.
Thankfully, most strategists expect more companies to contribute to earnings growth in 2013. And since stock prices ultimately follow earnings, I sure hope they’re right!
Unless, of course, the world ends today as predicted by the Mayan calendar. Then, nothing matters.
Hedgy Say What?
On May 1, famous short seller, David Einhorn, raised suspicions about Herbalife (HLF). And management scoffed at his “elementary” questions.
On May 16, I warned you to stay away from the pyramid scheme-like business. And many readers claimed that I just didn’t understand jack about the company.
Then, in mid-August, news hit that the SEC questioned the company about the same issues Einhorn raised.
Fast forward to today, and hedge fund manager, Bill Ackman, just revealed that he’s been shorting the stock for months.
Why? Go figure, he thinks it’s a “pyramid scheme,” too.
It’s not surprising that the stock hit the skids on the news, dropping 16.7% (and counting). All told, shares are down 47% from their high in late April.
While I’m no Ackman or Einhorn, I’m no idiot, either. If their research raised serious questions about the company, there’s definitely much more downside risk to the stock than upside potential.
So I’ll repeat my previous recommendation. Get out while you can. Or buy some put options.
Unless, that is, you believe in betting your future profitability on a pyramid scheme. I don’t know what could possibly go wrong with that!
That’s it this week. Before you sign off, do us a favor. Let us know what you think about this weekly column – or any of our recent work at Wall Street Daily – by submitting feedback, leaving a comment on our website, or catching us on Facebook or Google+.
Wishing you and yours a very Merry Christmas!
Ahead of the tape,