Huge Imbalance On The Close

I tweeted this to my followers 15 minutes before the closing bell.Stocks were sold all day long on huge volume.  I was dead wrong on the Monday bounce.  Even after a whole day of selling we still saw huge sell side activity on the closing imbalances.  By the time the dust settled my spreadsheet reported $1.1 billion to the sell side and $9 million to the buy side.  Keep in mind, this is not some sentiment report asking people how they feel about the market.  These are real orders to be executed on the close.  Overwhelmingly bearish activity.  Take a look at the graph below to get a feeling of what $1.1 billion looks like compared to $9 million.

I follow the aggregate $OEX index imbalances rather than the whole S&P 500 or NYSE composite because the $OEX members are the most aristocratic of the blue chips and generate less noise.  These are the most liquid stocks in the world, so when big money moves through these instruments you pay attention.

Does this mean sentiment has gotten so bad and the selling so overdone that we can finally have that rip-your-face-off rally everyone has been prognosticating about?  Or does it mean that sellers are firmly in control and we’ve got more pain to come?  In the past, we’ve seen a big buy imbalance jolt a pessimistic tape off the lows and lead to a huge bull run.  Man, those were the days.  Who can tell what this market will bring.  There are some traders out there just waiting for the moment — that match to gasoline moment where they get to ride a flyer up 50 handles.  That’s not really my game.  Know your role, and don’t get too crazy.  Remember, picking bottoms is the most expensive game in the world.

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