Ask the Readers: Should We Get Married Sooner to Lower Our Taxes?

This article is by editor Linda Vergon.

Landen and his fiancé are planning to get married in the fall of 2015 and they’re starting to think about how to blend their financial lives together as they tie the knot. There are always a lot of decisions to make when you get married: Will you keep your finances separate or merge them together? Will you add each other onto your existing bank accounts or close them and open joint accounts at a new bank? On and on it goes.

They want to be smart about their finances from the beginning, but somewhere along the line Landen became aware that, in their circumstances, that might also mean they should rethink when they get married. He wants to know: “If we filed our taxes jointly, would we pay significantly lower taxes than if we filed separately? In theory, we could get legally married in 2014, if the savings are worth it, and then hold our actual wedding ceremony with friends and family in 2015. Thanks!”

Landen’s future wife is currently in grad school and keeps a part-time job on the side. It doesn’t provide much income, just $ 10,000 a year approximately. On the other hand, he is established in his career and earns a little less than $ 200,000 a year. The difference between their incomes is big for now, and they don’t own a home or have any investments like a 401(k) plan from his employer yet – but that may change if the company he works for sets up the plan before the end of the year. (If they do, he plans to max that out. If they don’t, he says he would contribute to an IRA and max it out.)

In the Land of Rough, Rough Estimates

Obviously, Landen isn’t a tax accountant – and neither am I! Still, I thought providing a rough (really rough ) estimate of the two different directions might be interesting. I went to the Internal Revenue Service’s website and looked at the Instructions for Form 1040. So even though I make no representation that this is in any way accurate, maybe it could serve to illustrate how to look at the problem and come up with a direction. Here’s what I did to think the problem through:

Earning just $ 10,000 a year, Landen’s fiancé is probably eligible for an Earned Income Credit (EIC) of $ 330 if she were to file single with no children, which would leave her with taxable income of zero after taking the standard deduction of $ 6,200 and a personal exemption of $ 3,950. So from the 2013 Tax Table, her tax liability would be ($ 330). I consulted the 2013 Tax Computation Worksheet – Line 44 instructions to understand Landen’s tax liability below, assuming the same standard deduction and exemption.

Taxpayer	Instructions (2013 Tax Computation Worksheet – Line 44)	Taxable Income	Tax Rate	Product	Subtraction Amount	Tax Liability Filing Single	Tax Liability Filing Married
Landen’s Fiance		$ 0				<$ 330>
Landen	“Over $ 183,250 but not over $ 398,350”	$ 189,850	33%	$ 62,650.50	<$ 15,869.25>	$ 46,781.25
Mr. & Mrs.	“Over $ 144,400 but not over $ 223,050”	$ 189,700	28%	$ 53,116	<$ 12,534.50>		$ 40,581.50

[Note: An earlier version of this article contained different calculations. Thank you to the readers who made suggestions to make it more accurate. – Ed.]

So if, according to my completely, insanely, rough-order-of-magnitude estimate, Landen and future Mrs. Landen were able to enjoy something on the order of $ 5,869.75 of savings on their tax return if they were to get married in 2014 and file jointly, would that be significant enough to change their wedding plans? I don’t know the answer to that question, actually.

But if I were to answer that question just on the basis of finances alone, I would recommend that they get married in 2014 as he suggests. Off the top of my head, I can think of three things I would do with those savings if I were in their shoes:

1. Fund the 401(k) or IRA with it.


2. Use it to defray the costs of the wedding.


3. Put it toward their honeymoon.

I hope they’ll let us know what they decide to do! But what is the best thing for them to do? What would you do? How would the answer change if Landen’s employer did open a 401(k) or Landen maxed out a Roth IRA?

Get Rich Slowly – Personal Finance That Makes Sense.

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Asian Currencies Lower Again This Week on Fed

Asian currencies are set to drop for a third week, the longest run of losses since January, as the prospect of higher U.S. interest rates dims the appeal of emerging-market assets.

Indonesia’s rupiah and Malaysia’s ringgit led the declines after the Federal Reserve on Sept. 17 raised by 25 basis points its median estimate for where the federal funds rate will be by the end of 2015, while pledging to keep it near zero for a “considerable time.” Global funds pulled a combined $ 906.1 million this week from stocks in Indonesia, South Korea, Taiwan, India and the Philippines. Counting began across Scotland following a referendum on its independence from the U.K.

“The key concern is capital outflows from Asia to the U.S.,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “The U.S. could raise interest rates at a faster pace than expected.”

Bloomberg

MarketPulse

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Intraday technical levels and trading recommendations on EUR/USD for May 1, 2014

Show full picture In March, the failure of the bulls to fixate above 1.3880 applied enough bearish pressure on the pair towards the recent demand zone around 1.3700. At retesting of 1.3700, significant bullish pressure was applied pausing the recent slide off 1.3965 which led to another ascending impulse towards 1.3880. On April 11, daily candlestick came as a bearish “Doji” indicating lack of enough bullish momentum above 1.6880. This was followed by bearish engulfing daily candlesticks aiming to apply bearish pressure on price level of 1.3800 which is still offering support so far. At the same time, several bullish attempts (including Tuesday’s bullish spike) took place to step above 1.3850-1.3880. However, immediate bearish reaction is applied resulting in successive reversal daily candlesticks pushing again towards 1.3800. On the other hand, price level of 1.3800 has been providing…

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In March, the failure of the bulls to fixate above 1.3880 applied enough bearish pressure on the pair towards the recent demand zone around 1.3700.

At retesting of 1.3700, significant bullish pressure was applied pausing the recent slide off 1.3965 which led to another ascending impulse towards 1.3880.

On April 11, daily candlestick came as a bearish “Doji” indicating lack of enough bullish momentum above 1.6880. This was followed by bearish engulfing daily candlesticks aiming to apply bearish pressure on price level of 1.3800 which is still offering support so far.

At the same time, several bullish attempts (including Tuesday’s bullish spike) took place to step above 1.3850-1.3880. However, immediate bearish reaction is applied resulting in successive reversal daily candlesticks pushing again towards 1.3800.

On the other hand, price level of 1.3800 has been providing bullish support so far. Yesterday’s daily candlestick is another bullish engulfing daily candlestick that originates off this level.

Since the EUR/USD pair broke below 1.3855, the pair has roughly been moving sideways with slight bearish tendency until the depicted uptrend line came to meet the pair roughly at 1.3700-1.3680 enhancing this price zone as significant intraday demand. This led to the recent bullish impulse above 1.3810 and 1.3855.

For the bulls, price zone of 1.3810-1.3785 remains the nearest DEMAND zone which provided a valid BUY entry previously. It corresponds to the lower limit of the ongoing consolidation range.

On the other hand, 1.3880 remains the nearest supply level for the bears. It should be watched for early exit from the current bullish position in case significant bearish momentum is expressed. . Stop loss for the bullish position should be advanced to 1.3770 to secure some profits.

The material has been provided by InstaForex Company – www.instaforex.com

For more info: Intraday technical levels and trading recommendations on EUR/USD for May 1, 2014

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Intraday technical levels and trading recommendations on EUR/USD for May 1, 2014

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Swing trading using momentum bursts

The basic structural phenomenon behind most ideas discussed on this site is ” Stocks move in short term Momentum Bursts”It has been observed and verified that stocks move in momentum bursts during bullish periods in indexes (bull markets).During “established” downtrend (bear markets) in index they show same phenomenon on the downside. They go down in momentum bursts of 3 to 5 days.In this kind of momentum burst move in a stock , the first day is range expansion which is immediately followed by follow through.The sequence looks like:Range expansion dayUp day (follow through)Up day (follow through)pullbackfollowed by end of momentum That is the bullish sequence. Variation can be 5 day burst. In rare cases you will get a 8 to 10 day burst.Sometime it will be variation of…

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The basic structural phenomenon behind most ideas discussed on this site is ” Stocks move in short term Momentum Bursts”

It has been observed and verified that stocks move in momentum bursts during bullish periods in indexes (bull markets).

During “established” downtrend (bear markets) in index they show same phenomenon on the downside. They go down in momentum bursts of 3 to 5 days.

In this kind of momentum burst move in a stock , the first day is range expansion which is immediately followed by follow through.

The sequence looks like:

Range expansion day

Up day (follow through)

Up day (follow through)

pullback

followed by end of momentum

That is the bullish sequence. Variation can be 5 day burst. In rare cases you will get a 8 to 10 day burst.

Sometime it will be variation of the 3 days with inside day or negative day after first day of range expansion.

There are many possible variations but essentially this is an impulse move of 3 to 5 day duration.

During this 3 to 5 days period stock would go up 8 to 20% ( lower priced stock can even have bursts of up to 40%).

Such bursts may or may not have clear identifiable catalyst. You need to know nothing about the company to trade this kind of burst.

This is a pattern and probability based trade.

It is largely mechanical way to trade for small profit targets.

(To find stocks likely to go up multi month or year I use other methods. They are also discussed in detail on this site. Just see the sidebar for some of the popular posts)

Move starts with range expansion

All such momentum bursts start with a range expansion. The first day of the move is range expansion day. Often there is also volume expansion along with range expansion.

The price moves in the direction of range expansion.

When there is range expansion it attracts breakout traders, it attracts other momentum players, day traders, quants and so on. That results in continuation of move for few days.

Range expansion basically means a day which is up bigger than last 5 to 10 days bars. A range expansion preceded by series of range contraction days is good candidate in this setup. Moves preceded by orderly range contraction can be explosive.

A successful momentum burst will lead to immediate follow through. Say a stock breaks out in the morning, it will continue to go up through the day and will have immediate follow through in next 2 to 3 days. And the follow through should also be of big 4 to 5% plus magnitude on second or third day.

In most cases the momentum dies down in 3 to 5 days.

If you keep holding after the 3 to 5 days period, you would often see the stock ends up giving up all the burst gains and may not have another momentum burst for several weeks or months. Sometime the burst gains vanish intraday itself.

Depending on price of the stock such momentum bursts can be of 8 to 40% magnitude. Lower price stocks tend to make bigger moves.

For a stock trading below 5 dollars a breakout day move itself might be of 10 to 20% magnitude. For traders with small accounts that offers good opportunity.

As a practical matter if you have large amount of capital to trade with it is difficult to grow your account by just focusing on these low priced stocks. You might have to buy lots of 50000 to 100000 shares for meaningful difference to your account.

Lower float stocks make bigger moves. Low float and high demand creates explosive moves.

If you see in any year the most short term explosive moves will be on extremely low float stocks. For those with smaller account size there is distinct edge in trading low float stocks.

No specific catalyst is needed for these momentum bursts.



Why do these moves happen?

In some case there might be a specific news catalyst on day of first range expansion day , but in vast majority of these kind of momentum moves, there is no clearly identifiable catalyst.

However tracking news on daily basis might help you enter some of these momentum bursts very early and magnify your profit.

During bull moves in overall market such momentum bursts have been observed for over 100 years.

This is structural nature of market.

You should be independently able to verify this.

@mhp a member on Stockbee.biz site also posted a backtest with 3 day hold period after range expansion on timeline to show how this works historically.

Here is a profit line from taking up to 6 momentum burst longs per day for the past 10 years, 1000 shares per trade, using simple mechanical rules. As per his backtest.

Stocks seldom run up or down smoothly.

A 30% move in stock over 3 months in a stock might be completed in 2 momentum bursts of 10 to 15% in just 5 to 6 days. Rest of the time the stock might retract or go in range.

In a year you will probably find 5000 to 10000 such 3 to 5 day setups when both bullish and bearish setups are combined.

Momentum burst kind of swing trading allows you to grow your account with very low risk.

For a mere 3 to 5 day exposure to market you capture the most explosive part of the move and you are not seating in dead periods holding stock waiting or anticipating a breakout which may or may not come.

Trading this kind of setup requires extremely good ability to ruthlessly cut losses if a trade does not work immediately .

It also requires skill to exit when things are still in explosive phase and not wait for reversal.

Per trade profit on these kind of trades will be on an average just 5 to 8% as you are only going to get part of the 8 to 20% move. By the time you enter on breakout day the stock might be up 4 to 10% , so you will not be able to capture that part of the range expansion move.

To trade this kind of setup you need to be willing to do 200 to 1000 or more trades in a year.

You make money by compounding these small gains.

So this is high frequency and low per trade profitability method.

There are periods in market where these kind of setups are prone to failure.

This happens near market turns where in short period lot of breakouts fail.

The bullish breakout trade needs to be avoided during fast selling phases in market.

The bearish breakdown trade works best after a downtrend is clearly established on 10 plus day time frame.

In a bull market trading 3 day bearish setups will lead to lot of failed breakdowns.

Because of the nature of the overall markets (they have significant positive bias), there are in number terms more bullish momentum bursts than bearish momentum bursts.

Once you understand this momentum burst based short term phenomenon, the next task becomes how to trade it by setting up proper procedure for it.

There are many ways to do this. Traders like @mhp trade it completely mechanically and have shown long years of profits.

His system is completely mechanical and based on custom developed software and execution tools.

Traders like me trade the method using discretion. I do not take every setup. I use some well defined criteria to only try and buy good quality setups.

There is extensive discussion of this on this site and the scans and steps I use are detailed here multiple times. I use Telechart to do this but people have replicated same thing in various other softwares.

www.stockbee.biz If you are serious about your trading and want to build an enduring edge the Stockbee Member site might be for you. One of the most recommended site for learning to trade. 2200 members and growing everyday… www.stockbee.biz

For more info: Swing trading using momentum bursts

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Swing trading using momentum bursts

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