Thursday’s Trading – 12/24/09

Yesterday, I mentioned that Exxon was the boat anchor holding down the SPX and Dow. And sure enough, XOM was down again on Wednesday. But why Exxon? Why is Exxon being sold?

I believe I have solved the mystery. Almost two months ago, I wrote about how the mutual funds were suffering redemptions. Well, guess what? The redemptions have not stopped. In fact, mutual funds that invest in US stocks have now suffered redemptions for 18 weeks in a row. Hard to believe, right?

So who’s buying stocks? Pension funds? Hedge funds? Sovereign-wealth funds? The Fed? Beats me. If you have a theory, I’d be interested to hear how the the market can levitate while the mutual funds bleed out. This is a very odd market.

In any case, fund managers are likely selling Exxon to raise cash to meet redemptions. Exxon is actually down 16.4% this year, so tax-wise, it’s better than selling Apple, which is up 122.7%.

What happens in 2010 if the redemptions don’t let up? Something else has to be thrown overboard, right?