Follow the Patterns

So far this year we have seen positive market action in the first few days of every month except for March. The strength has generally lasted about three to five days, but we have always dipped subsequently and made little further progress each month, other than in April. So the action today is very much in line with the prevailing pattern.

The explanation given for this tendency is that automatic pension contributions and the like are made on the first, and that money is immediately put to work in the market. There doesn't seem to be any reason to doubt that, as it certainly has been a strong pattern.

Even though this tendency is no secret, it sure looks like some folks were caught by surprise today. I think many were looking forward to some slower action in front of the holiday. Breadth is quite strong and we have a strong breakout in Intel (INTC - commentary - Trade Now). Oils have reversed a bit but technology stocks are staying quite strong.

It has generally been a mistake to try to short this beginning-of-the-month action too soon, and a rotation into technology is something that could gain a little momentum as market players try to find some newer themes.

The dollar is taking a beating on talk the China is asking the G-8 summit to consider a new global reserve currency. That is helping the commodity and energy trade and gold in particular. I may look for some gold trades later in the day depending on how things hold up.

No positions.

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Know what you own: Rev Shark mentions gold. Companies in the precious metals space include Barrick Gold (ABX - commentary - Trade Now), Goldcorp (GG - commentary - Trade Now), Agnico Eagle (AEM - commentary - Trade Now), Yamana Gold (AUY - commentary - Trade Now), Kinross Gold (KGC - commentary - Trade Now) and Newmont Mining (NEM - commentary - Trade Now).

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.