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5150@xxxxxxxxxxxxxxx wrote: I invite comment on the following...
> I've heard it said that the reason behind these kinds of moves and
> market
> conditions is the use of sell programs on the part of funds that want
> to
> exit long positions in the underlying issues of the S&P stocks.
the book, "Stealing the market," by Martin Mayer makes this very claim.
the book was written around 1990, so the data is recent.
if you were a large holder of SP stock, wouldn't you do this?
-jack
>
>
> The procedure goest something like this:
>
> 1. Short the spooz.
>
> 2. Sell your stock, causing the cash index to drop, pulling down the
> spooz.
> (PREM opens up, sucking in other sell programs at times.)
>
> 3. Before you're done selling, cover your spooz short.
>
> 4. The profit on the spooz short mitigates or even outweighs your
> slippage
> on the equity exit.
>
> Because you're the fund selling the stocks in the index, you know when
> to
> cover the spooz with exact timing.
>
> The fellows in the pit are wise to this and know when these programs
> are coming in so they're careful to stand back.
>
> Lately we've been seeing a lot of these "afternoon selloffs" that seem
> to hit
> just after lunch. The equities go up in the morning, hang around for a
>
> while during lunch, and then you might get a few minutes of warning as
>
> the slide starts to hit before it turns into a full on rout. Then as
> suddenly as it came on, it goes away. For an example look at the spooz
>
> today from 1350 to 1530 to the close. (Who picked those numbers
> anyway?)
>
> True or False? Comments RT?
>
> Phil
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