a down day

Stocks sold of throughout the day yesterday.  Nothing unusual about that, especially after the strong performance of stocks on Wall Street last year.

My take is that this is taxable investors, predominantly individuals and not mutual funds or other taxable institutions, I think, who are rearranging the positions where they have gains.

what to do

Three things, other than rearranging your own holdings:

1  wait for the selling to abate  The amount of downward pressure on the market and the number of days it takes for selling to tail off will tell us a lot about the overall tone of the market.  Shallow and short are my guesses–but I’m content just to watch to see how tax-selling plays out.  It’s always possible that selling will begin to feed on itself and turn into a minor correction.  I don’t think so, but I find the twists and turns of the market nearly impossible to predict.  So my primary inclination is to watch and wait.

2.  analyze  Look for odd price action–either stocks that come under a lot of pressure or ones that are rising in a down environment.  Yesterday, the strength of TWTR really caught my eye, as did the up movement of SPLK, WYNN and LVS.  That’s bullish for all four (all of which my family owns).  I’m not looking to buy any of them right now, but if I were I’d be thinking I shouldn’t wait for them to dip before buying at least part of the position I was contemplating.  I know that’s not watching and waiting, but…

3.  shop for bargains  For example, I’m intending to add to my VZ before the merger with VOD happens.  So a several-day selloff in the former would suit me fine.  I’ve got one or two stocks earmarked for sale at slightly higher prices.  But if I could find a replacement at, say, 5% less than I’d expected to pay, I’d make the switch now.

Also, for anyone in the northeast US, try to stay warm.  It’s -9 degrees Celsius in New York now (colder in the suburbs).  It will be -15 tonight.  The wind is making it feel 5 to 8 degrees colder.  Brr!