Ted Allrich is the founder of The Online Investor and author of Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he offers advice to investors who are just getting started.
Not funny, ha, ha. Funny as in odd. Stocks act differently between now and the beginning of next year. Some stocks move for no apparent reason. Others don't move even when news is good. Here are a few reasons why.
It's time for investors to take losses. And there are plenty of those in housing stocks, financials and biotechs. Other industries have been hit as well this year but those stand out. You'll see many of these stocks drift down over the next few weeks as investors dump them to either take a loss to balance against a gain or decide to move into other stocks, unless there's a specific announcement by a company that is good news. Even then, there may not be as strong a reponse as you'd expect.
That's because a lot of investors are busy with other things this time of year. Families get together. They shop for the holidays. There are shortened workweeks. It all adds up to preoccupation with other things and an attitude that says: "I'm done for this year. I'll start again in January."
That means less buying power is in the market. Without that, specialists and market makers are the only ones around to buy stocks. When that's the case, bids go ever lower as traders get heavy with inventory and little or no buying interest to relieve it. Specialists and market makers don't like to own stocks. They like to sell them as quickly as they buy them. Their preference is to go home each day "flat," no stocks long or short.
If you see one of your stocks drifting lower day after day with no news behind it, it may just be one large seller who wants out with no buyers interested at the moment. Or it may mean bad news is coming that no one else knows about. But if it's not public knowledge then someone is trading on inside information. With tax selling a main motivator right now, it's more likely it's just a seller who wants out.
That's the bad news. The good news is that on the Friday after Thanksgiving there have been some extremely strong rallies, even though it's a short trading day. Like I said, funny things happen between now and January.
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