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Over the past couple days, you've been asking a lot of questions about one, specific topic: Inauguration Day.
But the focus isn't so much about the event itself… it's about what the media is "advising" you to do with your money ahead of time.
And what they're saying could potentially destroy your portfolio and undo any profits you've already made this year.
So we need to talk about this right now – before it's too late.
The Truth About "Selling the Inauguration"
Q: When it comes to all of the media Inauguration Day "chatter," do you believe in this whole idea of "buying the election" as far as how the stock market's performed since Nov. 9? If so, do you believe that people should then "sell the inauguration?" And at what point should they consider buying again?
A: There's definitely been a lot of chatter out there in the media about the election. But remember… when you go back and look at the SPDR S&P 500 ETF (NYSE Arca: SPY), it was drifting sideways to slightly lower going into Election Day. Right after the election, we had a pop.
Now personally, I don't think it ultimately mattered who won the election – that pop was going to come either way. That's because the market had some good technical signals, but everyone was holding their breaths, so to speak, until the results were in. Then everyone "exhaled," and the markets moved higher.
Right now, we're sitting on all-time highs again, and the concern is whether or not investors "bought the election" to "sell the inauguration." While there are some smaller patterns that point to this being a possibility, what drives the markets in January more than anything else is earnings. And this is based on the data I look at as a rules-based trader – not what some "expert" in the financial press thinks will happen.
Take a look at the January forecast… As we approach Inauguration Day, and through the end of the month, you're looking at a strong bullish sentiment. This was the case last year, too. As you may recall, we experienced the worst volatility since 1930 before turning bullish mid-way through the month.
After Inauguration Day, in particular, SPY has returned an average profit of $3.13 between the end of January and the end of February. This has happened every year for the past 10 years, with the exception of 2009, which was really spillover from the recession. Last year came closer to an average profit of $4.50, despite the volatility we saw.
In this case, if you were to "sell the inauguration," you'd miss out on these types of gains simply based on what the media told you to do. And remember… they're in it for ratings – not your financial future.
So here's the thing…
Keep your ear to the financial railroad tracks – but don't base your trading decisions on every headline. Instead, use these three simple steps …
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.