Zeev- I agree with you that WCOM(fill in the letters of the week here) is distorting the nasdaq trin. Today, it was "only" about 10% of the total trading volume, but since it went up 14% (2 cents!!), it had to be screwing up almost every indicator there is, except those that just count stocks up vs. down. It has been that way since the scandal broke and I think they really should either be delisted, or have a reverse 100:1 stock split to restore balance to their trading volume and its effect on the indicators everyone uses to gauge market direction.
In another vein, and this is really the point of this post, I've been closely watching the unusual trading activity of a couple of my small cap favorites, one of which I'm sure you've heard of- PANL, over that past few days. The trading has been very peculiar, in that the price will lock at a certain point and 10's of thousands of shares will trade at the ask without the price moving a penny. Then it will ratchet down and repeat the process. Today it really got pasted, but the shares seemed to run out towards the end of the day and there was some recovery. The trading volume has been 4 to 5 times normal. This behavior appears to me to be possibly the liquidation of the holdings of one or more funds. I am thinking that the cause is something we haven't seen in a long time- redemptions by the public of their fund positions and the need for the funds to raise cash to give back to those sellers of their funds shares. As you already know, the funds are supposed to be short of cash, and we have had truly large redemptions the past 2 weeks. I believe it was 13 billion 2 weeks ago and 18 last week(I may have gotten these figures totally wrong, but the point is the same). Depending on the average share price you care to use, that works out to a couple of billion shares that needed to be dumped at almost any price to get the required $$.
An associated observation that startled me, was that on island's top 100 list of percent losers today, where I expected to find both my PANL and ENER holdings, you had to have a loss of OVER 18% to make the list!!! It was no consolation to me that they weren't there. It looks to me like the small caps are really getting whacked. Also note that fully 20% of the NYSE issues and 12% of Nasdaq issues hit new lows today.
Now, this should be encouraging signs for the formation of a bottom, but I am very concerned that the "new" effect of money leaving funds instead of the steady influx will snowball as the public gets more and more scared. We have more people invested that ever before in the market through their retirement accounts and if they continue to increase their withdrawals from stock funds to put the money somewhere it won't disappear, we could be in for a really rough ride, that might preclude any rally based on valuations or bottoming indicators.
Do your turnips take this particular effect into account in their modeling of market behavior?
Thanks for the thoughts,
-Ted
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