How 1 big seller can wreck an index

The Russell 2000 is taking a hit this week. It could reflect changing investor sentiment, or it could be due to a large account liquidating.

By Jim Cramer Jul 8, 2014 12:01PM

Dow Jones, Standard & Poors, Nasdaq, Russell 1000, Russell 2000, US Stock Market Indices © Image Broker/Rex FeaturesMonday, the Russell 2000 ($TOMX) index had its worst day since April 25, when it fell 1.86 percent. What does it all mean? logo

Is it a sign that Janet Yellen is having second thoughts about easy money now that a bunch of firms have come out and said that rates are going to go higher sooner? Is it a sign that the market's gotten overheated and we are at a top right when earnings season is about to begin, a sure sign of pain ahead? Is this the beginning of the end of the big cloud bounce-back, right when the right shoulder says it should be forming?

Or is it because some large account liquidated its Russell 2000 positions and we all had to pay the price?

I bet it is the latter.

We have to accept the fact that the volume in actual stocks away from ETFs is simply fractional. A motivated seller without a lot of horse sense, someone who hasn't been in the game long enough to know that you can liquidate slowly, or, alternatively, someone with little to no patience can wreck this tape lickety-split.

Think back to the horrendous momentum selloff that started at the end of February. That was all about supply overwhelming demand and all deals failed, even the good ones, although most were, indeed, bad ones.

Then we got the resurrection that began when the insider selling ended, the shorts pressed their bets and the IPOs simply disappeared. Oh, and course, the takeovers decreased supply.

Since then we have seen good deals re-surface: Arista Networks (ANET) and (JD) come to mind.

But for the most part this last move occurred in a non-earnings related vacuum.

I think that other than biotech, which actually broke to new highs, we are looking at some hedge funds saying now, "this is our chance, because there's a big seller in the marketplace and we can run ahead of him."

That's the same stupid thinking that cost hedge funds so much the last go around, when the selling dried up faster than they could cover their positions.

No matter, be aware that we talk about markets being thin all of the time but we rarely talk about the impact. On Thursday's half day, the impact was super positive.

Monday's impact? Something that truly had the appearance of the beginning of a correction that might very well be one huge seller trying to lock in profits. 

I wish there were more to it, but there probably wasn't.

Random musings: I talked about takeovers all day because they are so immune to earnings, hence the Abbvie "buy Shire at any price" modus operandi.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned. 

Jim Cramer headshotJim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.

More from TheStreet

Jul 8, 2014 1:41PM
Maybe cramer is just covering his @ss after posting this headline yesterday !!

"It's time for more aggressive investing
Last week's employment number shows the market has room to grow. Standing still is no longer an option."

Jul 8, 2014 2:55PM
if cramer was trading and got aggressive as he recommended he would be losing big today...............this is just the exact mentality that busted him from hedge fund mgr to carney barker
Jul 8, 2014 2:38PM
without cramer how would i know the russel was down? his next article might be that the market goes up and down. i wish cramer would be replaced by someone who actually makes market picks and is accountable
Jul 8, 2014 2:43PM
There is no @ss covering in this article. But then again, if you have to write an article everyday to make your pay check, how much "new" @ss can you cover?
Jul 8, 2014 4:51PM
I think Cramer is even worse than I am at market timing.
Jul 8, 2014 1:54PM
Let's make out like the sky is falling and lure in more shorts and by thursday we can hammer the crap out of them.  Same song same dance.  This market is like a kept woman. As long as O and the in crowd need the moneyed folks calm and collected there will be no correction and she will get a new dress.  Just throwing the Street a bone is all this is.
Jul 8, 2014 2:35PM
Low volume magnifies this.......  JMHO
Jul 8, 2014 4:19PM

The "Straight Skinny".....

We can take 118 points down on the DOW.....NBD.

The NASDQ and RUT2K took a wailing today, compared to others...

And the VIX jumped up over 7%....Or somewhere around 12+ and change...

More tomorrow...? If we make it through the night, without going out a window....iiiiiiEEEEEaaaa !

Jul 8, 2014 12:11PM

of course one big whale could sell a large portion just to screw up another big whale's accounting sheet too, right?


or the automated buy-sell software could burp and cause trouble. 


there's enough big money and automation now to cause grief with really no outward reason.  other than to exploit the resulting drops!

Well main stream reporting has started to announce the death blow to the American dollar.
Russian and Chinese actions to move world trades away from the dollar and to the yuan and ruble and other currency is working at a much faster rate than anybody has imagined. Yep I may have to up my collapse date of Sept 15, 2015 for the collapse of the dollar.

Look the US stock market and bond market are going to under go a huge change soon. The rates the Federal Reserve have to go up and go up fast or they will not keep pace with the fall of the dollar and do no good to reduce the deficit to GDP ratio. Pretty much GDP is about $9 trillion and debt is $17.5 trillion well into the danger zone once you use standard practices to determine GDP and not the made up stuff they have been using for years.

There is more weakness in the American economy now than in 2007-2008 period.

And there are larger economic bubbles out there now then there were than.

Things are going to fall apart very fast now folks.

Jul 8, 2014 12:34PM
Yup that's correct Steve, the manipulators....And the big traders...They need the action.
Jul 8, 2014 4:23PM

The Last real Barry...

Hurry over to Mickey Dee's article they are bumping Obumpa over there, Don't miss out.

Re-Toggy, knows he is a lame duck;  Quack, quack....

have a nice ranting night...

Jul 8, 2014 4:24PM
I have no sympathy for anyone that is going to get caught in what is coming in the very near future.  if you end up taking significant losses, don't come crying here.  All of this is going to end very badly for a lot of very greedy people within the next 6 to 12 months.
Jul 8, 2014 3:59PM
I believe Mr. Facts, might be a plant, from "thestreetdotcom"...??  LOL...
Jul 8, 2014 3:56PM

Well all the afternoon Morons have gathered on the McDonald's Blab..

Most anyway except for a couple, like Smeado and such..

When they get a McDee's, Taco Bull, Walmart, Target and GM blurb; They all gather to rant...

But they never talk about the companies, stocks or investing...Just rants

Probably mostly the West Coasters, Vegas sleepers, my apologies to Steve, LOM, Ice Cold and a few others.

Jul 8, 2014 4:02PM

I find pretty much talking about Obumpa, is a waste of my typing skills...

Same as answering in the reply section, very often; Or voting that thumb's thing...

But ranting about it, is more fun and a BIGGER waste.  hmmmm?? 

Jul 8, 2014 4:10PM
Well, like we warned this morning folks, the sidelines was the place to be today...Manipulators took over right at the opening and didn't let go all day.....Actually we are surprised we didn't end down closer to 150-160 on the Dow, with this low volume....Scumbags have had two good ones in a row and have no doubt whatsoever they will try to make it three tomorrow...Be careful.
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