Tax loss selling in early 2009? Bet on it!

That's correct! Expect some tax loss selling over the next few weeks, especially from those who believe the markets will do better in the last half of 2009. Not many had profits last year to take losses against but there is hope that this year will turn around by yearend. This will be the catalyst for selling of stocks in the next few weeks. I am out on a limb here but I do believe it makes sense, especially given the last run up over the holiday on low volume.

This makes those very cheap ETF Ultra Short funds more attractive now than ever, like SDS and TZA. It will be a very interesting thing to watch unfold. If people sell now they can repurchase those same shares in early February, after President Obama has released his stimulus package and we can see the market reaction. If the market has a negative reaction and drops, those who sold can just wait until the bottom is in, as they will have cash, and can repurchase those shares cheaper.

If you hadn't thought of it, this might be the best time to consider it. Tax loss selling now may make the best sense of all for a strategy for 2009.