A New Year, A New Focus

May 25, 2006
By seadmin

Now that we have some clarity on what the Federal Reserve’s thoughts are on our economy going forward, it’s a good time to take a look at a few other forces out there that can affect this market and your investments in the New Year. Some of which are:

1) Corporate Earnings: these are a biggie for the stock market. The last earnings season was quite rosy. What does that portend going forward? You know the old adage: sell on good news, buy on bad.

2) Employment: continues to be strong in the midst of good numbers regarding housing, manufacturing, the services sector all of which keeps consumer spending rolling along to support 66% of our economy.

3) Housing: the bloom has fallen off the rose for this sector and the question remains as to how barren the bush will become.

4) Manufacturing: One weak number does not a trend make, but keep an eye out as we continue to send our purchasing dollars internationally without comparable reciprocation.

5) Inflation: Gasoline is well below $3 a gallon, hip-hip-hooray. We have all become so accustomed to being screwed at the pumps that we say thank you when it ceases to be excruciating and simply remains painful.

6) Extremely painful adjustments: Someday these words may make "irrational exuberance" passe. Alan Greenspan’s warning about out of control spending in the form of federal entitlement programs and consumer lust for the biggest plasma screen TV China can make are the wake-up call that the entire nation seems to be sleeping through.

7) The lack of a plan: Investors are so caught up in the "next big thing" that they are not seeking profit protection.

2006 is a New Year with a new focus. The switching over of the calendar year gives investors the opportunity to digest the trends that drove the markets in the previous year and to recalibrate their investments and contemplate the likely avenues for profits going forward. This exercise is crucial for us trend followers because trends are not set in place forever. In fact, just like most everything else in life, the only constant is change. The one thing we do know is that sector rotation happens with all trends. Where you made money last year is probably not going to be the top-performing sector this year.

Take the following steps to protect your assets in the New Year:

1) If you are sitting on gains from last year’s investments, be sure to monitor those gains carefully and set a trailing stop loss to protect them.

2) Make 2006 the year you beef up your international investments allocation to as much as 50% of your portfolio, and remember, your exit strategy must be firmly in place. Look at EWT.

3) Prepare a watch list of investments you are interested in accumulating should the trend fall into place. These are not equities that you will necessarily buy, they are just your best guesses as to what might set a trend. Be sure to add names to the list as appropriate. It’s not a commitment, it’s just a list.

4) Carefully monitor the trends occurring with all of your investments; those you own and those on your watch list.

5) Actively employ the use of the "Tools" section on my website at http://www.dougfabian.com. This section of my site gives you everything you need to monitor the market activity and its impact on your investments.

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