The Reformed Broker has a piece out today talking about window dressing. As a technical analyst I am aware of the games that can happen but I can’t ever bet on it. The reasons why a market moves doesn’t really matter to me. Of course you put things in the back of your mind for later reference but it is a relationship not an event that matters. I hate to burst any bubbles but the market moves and some losses and wins are for no reason.
Cheap to move
If they were really trying to window dress this market they could do it and it wouldn’t be too expensive. The theme of the year and especially of lately is that we have a highly correlated market. If you wanted to move the S&P 500 you could use the NASDAQ, the Dow, or the Russell; less expensive and less liquid market. YTD correlation is 95.63%, 98.26%, and 96.35% respectively. In our newsletter we have been discussing that how at first the the Dow was leading then the NASDAQ to now it is mixed depending on the day. You can a read more specifics here. This rotation tells me it is shift in risk and not an attempt to move prices higher.
Have had a million chances at prices.
It is hard to tell where funds are long from because we have traded these prices so many times. However, if you look at the yearly Market Profile chart for the S&P 500 and over the last quarter it is obvious they are long from higher, I am guessing in 1230-1250 area. But the market has been rotating really well back and forth. It has been volatile but has done it in a range. I understand the need to chase returns but there is no need to chase prices. They should have made that adjustment and assuming they still effect the market, someone has adjusted to it if you look at any chart from this year. They should have started window dressing earlier if they wanted to get it back there.
Where my argument fails is if they do not have more money to deploy. If they are deploying their last bit in this attempt; Josh is right, it is worst than short covering.
EDITED: You could probably use $AAPL or $SPY more cheaply than the indexes.
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