August 5, 2011

When I talk about the S&P 500, I'm really talking about one person or entity, because if you watch the numbers daily, you can see it's really one hunk of money getting moved around. I used to call this person the $200 million man, but it's much less than that now that he's moving around. But generally the idea remains the same. Whatever this guy does, the market usually goes the other way. Certainly not always, but most of the time.

Today, after being on the positive side all through that debt ceiling stuff, and the big drop, he jumped on the negative side. This would usually mean a move up. There was a little move up in the Dow, but the S&P 500 actually fell a little more. So that surprises me. The numbers for this week in the S&P 500:

Monday: 166.57/101.41

Tuesday: 176.68/99.74

Wednesday: 130.72/140.09 (almost looks like he moved some money to the negative side here)

Thursday: 75.76/125.83 (he gets totally out of the market)

Friday, today: 77.64/164.25 (he goes in on the negative side)

Interesting. I would have thought he'd stay out a while. When you have such a large drop as we had, most people would be looking for some kind of relief rally. So I guess he's convinced this is very serious. This could be very good for the markets if he stays there.

I'm not saying this guy's money affects the markets. I'm saying this guy is the perfect representative sample of what many people are doing. You can never make a market move based on what this guy is doing because he can easily change from day to day.

But anyway, the important number I look at is the Nasdaq 100. The Nasdaq 100 numbers for this week, and I'll just show the final result of dividing the larger number by the smaller number:

Monday: 4.17

Tuesday: 4.55

Wednesday: 5.12

Thursday: 3.02 (fear finally sets in)

Friday, today: 2.63

I can tell you the negative number has remained pretty much the same through this, which is what I would expect with such a large drop. The market is due for a strong relief rally, and you'd hate to go short and get nailed with a big move up. But I can tell you that that 2.63 number means we have definitely not reached the bottom of this decline yet, although we could be getting there, maybe. Also keep in mind that until the last year, that 2.63 number was equal to the highest number I had ever seen, which came at the all-time market high in 2007. So notwithstanding any rally early next week, no matter how strong, we will turn back down and go lower. I'll put my blog's reputation on the line here. At a bare minimum, it has to get down to 1.70, which was what it got down to at the previous two major lows of this year. But those lows came as the Fed was doing its thing to prop up the market, and that program is now over, at least for now. So I still think we probably have to go negative in this number before reaching a low for this move down.

Rob