Monday, June 26, 2006
We continue to experience wide daily price swings making it necessary to scale into our trades in pieces. Buying smaller shares sizes provides us with several advantages. First it provides flexibility, allowing for us to add on shares once the market provides more information. Second it allows us to move our stops out wider so that we don't get stopped out on market noise. We believe that these and other advantages far outweigh the small increase in brokerage fees. We are nearing the end of the month when trading advantages are strongest and where we generally see a rally due to an injection of new money into the market via retirement funds. This month we could potentially see a stronger rally than usual. The fourth of July rally is a cyclical rally that often arrives as pressures from the "sell in May and go away" culminate into an oversold condition that produces a mid summer relief rally. This year the factors are all in place for just such a rally to ensue. We may see some weakness in the beginning of the week, but we plan on using any potential weakness to accumulate.