Some of my readers will recognize my previous work from the Reversion to the Unified Mean (RUM) Wave blog. I wrote it in relative anonymity for a couple years. That work can now be found here.
Yesterday I watched a great video on Bloomberg online about fund re balancing. Essentially, the video stated that funds that are heavy in stocks will be selling this week because it is the end of the quarter and they need to re balance their fund. Here's an example. Lets say you have a fund with $1 million under management. In your prospectus you say that you want to hold 60% stocks, 30% bonds, and 10% cash. Over the last quarter, stocks have outperformed bonds by a significant amount. So, now your portfolio is heavy on the stock side. So, you as the fund manager, need to sell some stocks to re balance your fund. Hence the selling.
Today the RumWave chart was very very close to a "sell" signal, but it didn't quite get there. Interestingly, the market bounced off a level of RumWave support after gaping lower at the open. A negative day tomorrow will probably trigger it.
Tomorrow ECB news will probably dominate the headlines, as a Mario Draghi press conference is planned. We'll see which way the market decides to interpret whatever he says.
Today's scores, coming down out of the stratosphere:
Some of you have been asking whether or not I got into oil. The answer is, not yet. I did some comparisons between oil and the EUR/USD and decided that with the dollar at such low levels, it is likely that the dollar will bounce at least a little and when it does it will bring oil down a little. They are (generally) inversely related. I'll let you know when / if I do get in.
If you have questions or comments send them my way at: firstname.lastname@example.org
GOOD LUCK TOMORROW!