Minor Movements In Prices

Within the major movements of stock prices, there always are several

minor movements, which are caused by various influences. One of the

important causes is the technical condition of the market. Another cause

might be called a psychological one. When stocks are moving up steadily

in a bull market, people closely connected with the market expect a

reaction and watch for it. The newspapers predict it. Consequently,

is sufficient let-up in buying to allow the pressure of selling by

the bears to bring it about. However, the desire to buy during reactions

is so general, many people rush in to buy and this buying, in addition

to the covering by the shorts, puts the market up again; and if

conditions are favorable for a bull market, prices will go up much

higher than they were before.

In like manner, we have rallies in bear markets. Of course the

professional bears sell during these rallies, with the expectation of

buying later at a cheaper price.

These minor price changes mean more to the majority of traders than the

major movements. The major movements are so slow that people get out of

patience, and yet those who are guided only by the major movements are

operating on a much safer basis. We believe that a greater amount of

money can be made, with a minimum risk, by being guided principally by

the major movements, while taking advantage of the minor movements in a

minor way. However, stocks do not move uniformly and there frequently is

an opportunity to buy some particular stock at a bargain when nearly all

stocks are selling too high. We try to pick out these opportunities for

our clients.

Reports of earnings by various companies influence stock prices, as does

also the paying of extra dividends or the passing up of dividends. A

peculiar psychological influence is noticed when a company declares an

extra dividend. The price of the stock usually goes up, while as a

matter of fact the intrinsic value of the stock is decreased by the

amount of this dividend; and sometimes it is advisable to sell a stock

shortly after an advance in its dividend rate.