Buy and hold is dead

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Buy and hold is dead
Commentary: Traders need to be nimble in today's markets
By Thomas Kee
Last update: 12:01 a.m. EDT May 4, 2009
Comments: 10
LA JOLLA, Calif. (MarketWatch) -- It is time to reconcile the positions I have recommended, and look for exit strategies. Anyone who followed my advice over the past few months is up significantly.
Assuming a dollar amount divided equally among all four positions, everyone should be up 27.4% as of April 29. Please review my February and April MarketWatch columns for confirmation. My March column will have resounding similarities to this one.
First, the General Electric (GE:
General Electric Co
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Last: 12.66+0.01+0.08%
4:00pm 05/01/2009
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GE 12.66, +0.01, +0.1%) and Microsoft (MSFT:
Microsoft Corporation
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Last: 20.24-0.02-0.10%
4:24pm 05/01/2009
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MSFT 20.24, -0.02, -0.1%) calls were more conservative in my opinion. When we attempt to identify turning points in the market before they are confirmed, we always want to select positions that are stable and capable of weathering the storm.
This assumes those positions are designed to be held for a while. This advice does not apply to proactive investments with associated risk controls. Only after a turn higher has begun should we become aggressive.
Appropriately, once the bottom was in place, I recommended ProShares Ultra Real Estate exchange-traded fund (URE:
ProShares Ultra Real Estate
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Last: 3.56-0.26-6.81%
4:00pm 05/01/2009
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URE 3.56, -0.26, -6.8%) and the ProShares Ultra Financial ETF (UYG:
ProShares Ultra Financials ETF
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Last: 3.42-0.11-3.12%
4:00pm 05/01/2009
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UYG 3.42, -0.11, -3.1%) .
These are aggressive for two reasons. First, these are financial and real-estate ETFs. If that is not enough, they are also double-weighted, so they move twice as much as those sectors. Although they are aggressive, they were very appropriate because the bottom was already confirmed. We should be aggressive at the bottom of market cycles, and conservative near the top.
If you listen to the pundits, you are usually aggressive at the top and conservative at the bottom. That is exactly the opposite of proactive strategy.
At some point in May, I will be recommending sells of all four positions: GE, Microsoft, ProShare Financial and ProShares Real Estate. At that same time, I will be recommending a short. I will continue to use my proactive strategies. ProShares UltraShort Dow 30 (DXD:
ProShares UltraShort Dow30
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Last: 52.80-0.71-1.33%
4:00pm 05/01/2009
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DXD 52.80, -0.71, -1.3%) probably will be ideal for my purposes.
I have detailed my proactive strategies in an easy-to-read Webinar. These rules will be used after we secure gains from the aforementioned position trades.
The economy is not out of the woods. I expect severe weakness in the years ahead. Proactive strategies are the only way to make money.
Buy and hold is dead. It has been dead for a decade, and it will stay that way through the duration of the downward sloping trend in the investment rate. This is detailed in the Webinar linked above as well.
From here, do not be greedy. Secure your gains, protect your wealth and get ready to make money on the downside once again.
We will always be ahead of the curve.
Thomas Kee is president and chief executive of Stock Traders Daily, Founder of the Investment Rate, Architect of the ATAP Program, and active supporter of risk control and proactive trading strategies; his automated, correlated, Market Timing and Stock Selection tools. His Web site is www.stocktradersdaily.com. End of Story

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