One thing about oscillating markets is they can be pretty boring. Very little has changed from my
standpoint. Momentum peaked a while ago, the Nasdaq continues to lag, and I
still believe the market is forming a top. Of course picking a top is extremely
difficult, so I continue to seek small amounts on the reversals when conditions
get stretched.
One thing ETF traders need to be aware of is that during mid to late December
many ETF’s have distributions. These distributions can sometimes be fairly large
and will cause the ETF to gap down, since the value is being distributed. ETF
investors that aren’t aware of this sometimes see this gap, panic, and sell.
Let’s take a look at an example from today. Below is a chart of the Turkish
Investment Fund [NYSE:TKF]. TKF went ex today and will be distributing about
$4.27 to shareholders. The gap down this morning, while it looked bad on the
chart was actually a gap up. In the first ten minutes of trading it sold off
fast and furious. Most likely the selling was accelerated by a combination of
standing stop orders and panicky, ignorant, investors. Anyway, the selloff
didn’t last long, as buyers stepped in and turned it into a solid trend day
higher. Those that panic sold just after the open were left holding the bag.
Fortunately for them, they will receive a parting gift in the form of dividends
and capital gains. That should take some of the sting out their error.
ETF’s will continue to distribute dividends and capital gains over the next few
days (many Ishares are set to go ex on Thursday). Make sure you’re aware of any
distributions for funds you hold.
Best of luck with your trading. Merry Christmas, Happy Hanukkah, Kwanza, Boxing Day, and Festivus!
Rob Hanna is the principal of
a money management firm located in Massachusetts. He has spent the last several
years developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.
