taxman, lots of questions! I'll try to answer as best I can.
<<Sell program as opposed to someone selling>> when an institution suddenly unloads huge amounts of shares, and does it because of a trigger in its model, it's a sell program. What is characteristic of sell programs, is that several institutions will do it simultaneously, because they frequently share models with similar trigger points (various formulas that correlate with interest rates, long bond yields, etc). This is actually not the most efficient way to unload shares, because such sudden moves tend to depress the market. A more steady selling into strength at least won't break the stock. Sell programs tend to cause huge downdrafts in stocks and markets.
<<how do you know how large or small smart or dumb the investors are or if they are buying or selling?>>
I watch LII and T&S on MSFT all day. Large institutions such as Goldman Sachs (GSCO), Merril Lynch (MLCO), etc. are not only market makers in MSFT (MSFT has a ton of MMs), but they are often conduits for other institutional trading in MSFT (as well as trading for their own accounts, or their client accounts etc.). Every market maker has a symbol identifying it, so I can tell from the LII who is doing what (more or less). Additional very detailed information about institutional trading in a stock is available from the NASD site. Institutions often mask their trading by working through ECNs. The ECNs most often used are INST, BTRD and REDI – though other ECNs can be used (for some reason not ISLD most of the time though). Sometimes you will see GSCO, MLCO etc, lined up with only a few hundred shares buying (or minimum display) – while huge INCA blocks are selling – and you see on the T&S, trades printing. If the trades are at the bid price, this *usually* means a sell, and at ask *usually* means a buy. Sometimes, you can have buys at the bid, and sells at the ask, but basically, that's how you know if it's sells or buys. A couple of caveats: sometimes big block sales, (like 100K shares) are arranged ahead of time, and as they often occur outside the market price, it can be harder to tell (and they are reported at a different time, so the T&S print of that transaction isn't reliable as far as time goes). As far as large or small investors – basically, if you see a string of buys and sells *interwoven*, and they are all in 100-200 blocks, it's usually individual investors trading (sometimes a *string* of only sells or buys of 200 shares can be an institution masking its activity). In a stock at the price of MSFT, 10K and up blocks of shares, are usually institutional money trading. If you have some experience tracking the trading behavior of institutions, you can pretty much tell what they are up to – unlike ECNs, every MM has the obligation to be on both sides of trades – so you'll see them on both the bid and ask side. But you can often tell what their intentions are, if they hang back very far on one side, but are inside on the other side. F.ex. if MLCO is willing to buy MSFT at 75 (their advertised price), while the current bid is 78, and they are offering to sell at 78 1/16 (current best ask) – you can figure they are only paying lip service to the requirement to be on both sides – obviously nobody will sell them shares for 75 – in effect they are not buying; meanwhile they are selling so assiduously, that they are always willing to take the lowest price – and so are at the inside ask most of the time. If you combine this with a lot of other info, you can get a good picture of what is happening. For example, in the above scenario, if you have all heavy hitters (big institutions like GSCO, MLCO etc.) line up on the inside sell side, and they hang back far away on the buy side, meanwhile on the inside buy side, you see ISLD, MASH (Charles Schwab's MM), NITE, and the T&S is just flying with most trades at the bid, you can surmise, that it's big boys selling, little guys buying.
<<smart or dumb the investors are>> when I said that the individual investors are often smarter than big institutions I meant it both literally, and figuratively. Literally – because the record of many institutions are not as good as the record of the better individual investors out there – just compare the returns of MF during any given time – most lose to the S&P 500, a few do better, but there are many individual investors who do far better than the best MF. Figuratively, because institutions almost never can buy at the bottom and sell at the top – it has to do with sheer size. It's the same when you trade – if you try to buy a huge number of shares, it affects the price. Individual investors often are the ones who start buying just as the institutions panic – almost all recent mini-crashes were rescued by individual investors, with the institutions following. Institutions missed out on the early internet mania gains – they jumped in way too late: example AOL. The only reason to even pay attention to them, is because they operate with so much money, that they affect the market. If they start selling MSFT – it will tank, and you will say “wow, they were smart”, but actually they are responsible for the tanking, and the individual investor who is smart can pick up the shares cheap.
<<didn't individuals know about microsoft before today?>> they did, but they may have seen all the new initiatives as indicating the long term good prospects for MSFT, and better earnings than institutional analysts project, therefore they may think it smart to pick up shares now, when MSFT is cheap. So, they did know, but with additional info, they act NOW.
<<what turmoil do you expect>> just the same as I've been indicating all along – institutional pressure, the trial, market conditions going forward etc.
<<why is this good>> if the market was positive, the news about MSFT good, and MSFT still sold off – that would be very bearish, indicating no faith in the stock. The fact that in the face of continuing institutional selling, MSFT rose, is very good – plus, it means that money is coming into the stock, which is good.
Hope this answers most of your questions! All IMHO, of course.
Cheers,
Morgan
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