Window Dressing At a Whole New Level

Ok, we'll look at some of the week's important events, but as far as window dressing, "The Art of Looking Smart" in which I previously mentioned , funds buy the best performing assets so it shows up on their quarter end statement, however, today's late day events are hard to believe, you won't want to miss it. However, for now lets use a better , succinct definition from Investopedia...

Window Dressing

Definition of 'Window Dressing' A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings. Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.  Window Dressing this week is for the end of Q2, the new quarter starts Tuesday, but there are settlement rules called "T+3" that often front load Window dressing to earlier in the week, "T+3" means trade plus 3-days to settle. Often funds will unwind positions they bought or buy back positions they sold for window dressing on the first day/week of the new quarter as no one will be the wiser for another 3 months. As of 3:30 p.m. today, the NASDAQ was the only average that was in the green for the week... So we had a VIX SLAM to try to change that, maybe to accomplish an attempt at a new high in the SPX which would look favorable for funds trying to retain clients or attract new ones... Right around 3 p.m. the VIX was monkey Hammered to send stocks higher, presumably to try to end the day with a new SPX high... although the monkey hammer sent the SPX higher, MISSION NOT ACCOMPLISHED...  In fact, interestingly at the red arrow we have a bearish Doji-Star, often a reversal candle, but a complete loss of momentum or sometimes called indecision. The next day at the orange arrow we have a bearish Engulfing Candle, often serving as bearish confirmation of the preceding Doji-Star. Note how the last 3-days have not been able to move above the range of the bearish engulfing candle for the SPX. The exact same is true for the Dow-30. While the CBOE's VIX was monkey hammered, the actual VIX protection that can be bought via short term VIX futures (VXX) in this case, made no lower low on the day unlike the VIX index which is unusual, it seems protection is in demand. Oddly we didn't see any migration out of bonds and in to stocks either as TLT stayed flat the last hour while the VIX hammering was occurring, typically Treasuries would be sold and stocks bought in a situation like this, thus their normal mirror/inverse correlation. Although the VIX was responsible for most of it and having TLT down on the day (but seemingly nothing to do with the last hour) helped the market via SPY arbitrage... Note when the Arb model picks up, in to the afternoon. HYG which is one of the main assets in SPY Arbitrage was used, but not to the extent we usually see as HY Credit looks a bit defensive. First earlier in the day as stocks took their first dip, HYG was already selling and negatively divergent vs the SPX, however, after that... HYG moved up to help the SPY Arb and market move higher, however, it closed unchanged and did not venture above 0% on the day, again, defensive looking action from the risk on HY credit asset. Of course the Most Shorted Index was in there too as most of those are momo stocks. MSI was actually weaker on the day just before the 1:15 dump, then it pitched in the last hour. This you have to see to believe (how many levers do they actually need to get the SPX to close up 1/5th of a percent?)..  The USD/JPY was used to help ramp stocks, 3C was showing distribution in to the move and after the task was accomplished... WOW, talk about being USED! Look at the USD/JPY to the far right with a huge red negative candlestick . SPX closed +0.19%, Dow a mere 0.04%, NDX +.46% and R2K +0.71%, that's some odd dispersion between the averages but it has been going on for weeks. It's pretty clear the NASDAQ and R2K outperformance were due to Window Dressing buying the high flyers and the Dow's poor performance likely due to dumping some of the blue chips that don't have the "momo" performance. *Heavy volume at the close was due to Russell rebalance. HOWEVER, THE BIG ONE WAS FROM NANEX... "On Friday, June 27, 2014 at 15:50:00 - 143 stocks suddenly moved at least 2% (with some exceeding 10%) in just a few seconds. There were 678 stocks that moved 1/2 of a percent or more.  This explosion of trading activity dwarfed even the closing seconds of the day, when the annual Russell Reconstitution process occurred (changing of symbols in the Russell Indexes). In the one second at 15:50:00, approximately 400 stocks had NBBOs (National Best Bid/Offer) that were crossed (best bid price greater than best ask price) and more than 1000 stocks had NBBOs that were locked (best bid price equals best ask price)." L Look at this explosion of activity... "Each line represents one of 678 stocks that moved 0.5% or more." Each line represents one of the 143 Stocks that moved 2% or more in a few seconds at 15:50:00. Value scale shows percent change from 15:50:00. Now that's taking window dressing to a whole new level, they don't even have to own the stock for a week, it can be done in 5 seconds! What exactly happened at 1:15 p.m. today is still a mystery, but we saw it in advance through 3C as I posted this a good 15 minutes before... Friday, June 27, 2014 Quick Intraday Update I'll get some charts up, but SPY, IWM, DIA as well as their Index futures are all negative intraday and adding to their negative divegrences. The Q's have been in line on the 1 min chart for the last 2-days, this is the first time they have even started to turn negative so I suspect they'll all be coming down shortly. I'll get charts up, I'm considering a quick fade trade for a downside move, but I'll let you know for sure if I do make that move beforehand as always. Charts coming. In addition, the Yen had it's largest gain in 14 weeks, that's why USD/JPY was pounded overnight, the US Dollar Index had its worst week in 14 weeks (helping the USD/JPY lower) and European stocks had their worst week in 14 weeks. When the week's action is viewed in totality, something feels very dangerous about this market as I had said yesterday when adding short exposure via SRTY. The 4 major averages, big sell dumps on a quarterly window dressing week (NASDAQ blue, SPX green, DIA white, R2K yellow).