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Strategies & Market Trends : Stock Attack -- A Complete Analysis
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To: Chris who wrote (13151)7/26/1998 1:50:00 PM
From: Robert Graham  Read Replies (1) of 42787
 
Money inflows may have a delayed effect on the market, but money outflows, particularly significant outflows, have an immediate effect on the market. This is because funds have now been maintaining very low cash positions to service redemption requests. When there is a large interest by people in liquidating their fund holdings, this forces the fund at a disadvantageous time to liquidate their stock positions. They have no choice or time to unwind their position. So you have allot of anxious sell orders hitting the market at once. This is a bad situation indeed for the funds to be caught in this position. If this continues, this can cost the fund allot which will significantly impact their performance record that they have been working to improve.

Usually fund holders wait to liquidate like this. In the past they have felt confident enough to ride out market adjustments, particularly if it can be rationalized based on previous market action. But apparently this is not the case this time around. If this liquidation continues next week, this would be more evidence that the broader market sell off will continue.

I do agree with your comments about fund money and how important it is to follow what the big players are doing in the market.

Bob Graham
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