On June 15th, I took the other side of NYSE floor-trader Steve Grasso’s “quarter-end window dressing” call. Grasso said that the mutual funds were levitating the market and would keep it propped-up until the end of the month in order to dress-up Joe Sixpack’s quarterly statement.
Who won? I did. In fact, I crushed Grasso like a bug. Instead of levitating, the SPX plunged nearly 85 points! (click chart to enlarge. (that’s right, I made a chart.)):
How is it possible that some guy who never set foot upon a trading floor (me) could know so much more about the market than one of the “locals” who appears on TV as an expert? Well, I happen to track mutual-fund money flows on DailyJobsUpdate.com, and during June, the mutual funds themselves were reporting massive redemptions. They didn’t have any money to prop up the market.
Look at the “Domestic” line on the latest report from the mutual-fund industry organization, the ICI. Joe Sixpack pulled money out of his mutual fund during every week of May and June. That was the largest wave of redemptions since the TARP crash in September/October 2008.