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Strategies & Market Trends : Roger's 1997 Short Picks
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To: ItsAllCyclical who wrote (6222)10/28/1997 7:08:00 PM
From: Roger A. Babb  Read Replies (2) of 9285
 
Jim, here is the "story" behind the Monday crash and today's recovery. The fund managers were mostly fully invested at the end of last week. They got nervous on Monday that investors would be cashing in because of the Asian mess and there was a selling panic as they tried to raise cash which continued until this morning when they suddenly discovered that fund investors were NOT cashing out but some were even buying more. Then they had too much cash on hand and a buying panic ensued that will likely continue into tomorrow. Since there was not a big cash outflow, one would expect prices to return to the 8000+ range quickly based purely on supply/demand.

We should not lose sight of the following:

1. Daily market action is driven by fund manager decisions.
2. But fund manager decisions over the course of a week are driven by the inflow/outflow ratio.

Roger
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