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Institutions & Hedge Funds Are Selling: Watch The F&%k Out



January 21, 2014 – Comments (2)

Institutions and hedge funds are selling stocks. Consider yourself warned. How do I know this? Let me explain simply. There is classic distribution going on and this can be seen clearly in the charts.

1. December 31st, 2013 the S&P 500 hit a new all time high of 1,848.36. The next trading day (January 2nd, 2014) stocks were sold hard. This tells us that as soon as the new year came, money managers sold stocks, taking profits. Remember, window dressing was over as of the 31st of 2013 and taxes on these new sales do not have to be paid until April 2015. Notice how eager they were to sell at the start of the year. That tells us they do not think there is much upside to this market.

2. Last Wednesday, January 15th, 2014, the markets moved higher, making a new all time high of 1,850.84. However, this was just an intra-day all time high as heavy selling came in, pushing the S&P back below the December 31st, 2013 high. One must ask, why was there such selling pressure as soon as the markets broke that high last Wednesday? The institutions are eager to use any excuse to sell. They would not even allow the market to close at a new all time high.

3. Today, the markets opened higher and hit 1,849.31 on the S&P 500. This was shy of a new all time high intra-day by 1.53 points. Please note that the markets this time, could not even take out the high from Wednesday as sellers started selling quickly. The markets have since gone to the negative side.

Notice the trend of distribution is getting stronger. First you had a strong close at all time highs on December 31st, 2013. Then you had a weaker move as the markets broke that high but quickly pulled back below by the end of the day on January 15th, 2014. Then today, the markets opened just underneath those all time highs and sold immediately. Strong, weak and weaker. That is the trend on the S&P 500 as institutions start selling more aggressively.

In addition, please note that margin usage is at all time highs. This is the amount that the retail investor is borrowing to buy stocks. The last time margin usage was at an all time high was in 2007 (before the financial collapse) and in 2000 (when the tech bubble burst). In addition, note that mutual fund money flow (retail investors) has surged dramatically in the last year. The same thing happened in 2007 as well as 1999-2000. Scary stuff.

The bottom line remains...the institutions and hedge funds are unloading their long positions and retail investors should be very scared. Watch the F&%k out!

Gareth Soloway

2 Comments – Post Your Own

#1) On January 21, 2014 at 10:05 PM, jiltin (45.76) wrote:

I see your inferences are not proper...If someone trusts this blindly and pull out their long investment,and later they see prices are going up....they will never believe you...Looks like a false alarm.

Sorry to say this, there is FOMC meeting at the end of this month and stocks are going to dive again soon.

Whatever may be the results of FOMC, stocks are likely go up. 

If "institutions and hedge funds are unloading their long positions", then down must come down 500+ points on a single day. 

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#2) On January 22, 2014 at 4:45 PM, Lordrobot (87.93) wrote:

Silly flawed reasoning based on some quasi notion of past performance. This year alone we have been subjected to over six months of this insane call for a massive market correction. It speaks for itself. If eveyone is selling then I want to be buying NOT SELLING. Higher highs marked by higher lows is a positive bias not a sell signal. Its just another false negative. The Fed is not about to kill the wealth effect in the face of retail consumer collapsing under the weight of obmacare.

Consider this. The average family of 4 using IRS numbers will have to buy Obamacare for $20,000 a year in after tax dollars. Suppose they make $60K. That is a massive cost for a baloon full of air.

Corps loses their health care deductions. The entire cost of doing business rises. You would have to live under a rock to think that the FED under Yellen will suddenly tighten in the face of this dumb political policy. Ameica is no growth but the FED is not aobut to push us into the abyss. The only thing carying this country at this point is the wealth effect. That is why I am in the Tepper camp. The hedge shorts will continue to be sent to slaughter.  

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