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.
Monday, the Russell 2000 ($TOMX) index had its worst day since April 25, when it fell 1.86 percent. What does it all mean?
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.
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.
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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 !
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!
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.
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...
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.
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??
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