Don't Buy in July

Don’t buy in July…

Maybe this should be a new stock market rule. Financial reporters love rhymes, I presume, which is why “sell in May and go away” gets so much press every year.

For the first time in months, it feels a little panicky out there. Yes, the maket will dole out some punishment this morning. A laundry list of issues is piling up all at once. There’s bank trouble in Portugal, European stocks are tanking, the Fed said it will end the central bank’s bong-buying by October, and earnings season is ready to bash your favorite stocks back into the ground.

Here’s an early-morning snapshot of the carnage:

Market Performance of Various Indexes and Commodities

In case you happen to be colorblind, stocks are in the cellar—while precious metals are soaring higher. The small-cap Russell 2000 is leading the market lower this morning. It’s set to drop by more than 2% at the opening bell. According to Bespoke Investment Group, the S&P 500 is on pace this morning for its largest negative gap opening since March 3rd.

As investor fears quickly come to a boil, it’s important to keep today’s move (however things turn out) in perspective. Our resource expert Matt Insley summed up the brain scramble that the market’s recent melt-up has caused, specifically the Dow’s run to 17,000…

“Allow me to answer the consensus question, with a few rhetorical ones,” Matt says. “How much money can the Fed print? How long can interest rates stay near zero? How much better can the U.S. economy get? How much worse can the rest of the world get?

“Get my drift?”

No doubt many of these questions will be amplified after today’s action. But that’s precisely why the emotional herds of investors will never beat the market consistently…

“17,000 is just a number. Just like 16,000 was a number,” Matt continues.” The market’s epic run-up is only as good as its next day. And by the looks of everything I’m seeing in the market there are going to be a lot of good days ahead. We’re still riding a 5-year, channeling uptrend. That’s a trend you won’t want to fight – no matter what the naysayers squawk.”

No, it’s not time to sell everything and head for the crash bunker. But playing it safe for during this turndown is crucial. As I reminded you back in the spring, staying away from aggressive buys is the name of the game when seasonality and a weak market are working against you.

Even if you’re a longer-term investor, you can make a weak market work for you. And you don’t have to sell everything and hide under a rock. Lighten up on stocks (especially any aggressive trades). Reassess your holdings and rotate into the safer sectors that are showing relative strength.

Regards,

Greg Guenthner
for The Daily Reckoning

P.S. Stick to the three best year-to-date performers in your longer-term portfolio we discussed early this week: utilities, health care, and energy. Sign up for the Rude Awakening for FREE today to see how you can trade these trends for huge gains…