WASHINGTON, October 4, 2017 – After looking like stocks had begun to peak, Wednesday morning trading action started out in the red and stayed there for awhile. But, like Dracula arising from his grave, the bulls re-emerged Wednesday afternoon and U.S. markets ended up the day, once again, in the green zone.
As noted in an earlier article, even the horrendous and sill largely unparsed tragedy in Las Vegas continued to unfold, the markets have continued their oblivious ride upward to wherever they happen to be going. Only Mr. Market himself (and those mysterious gnomes of Zurich) seem to know when we might achieve peak party time.
As we write this late Wednesday evening, stock futures are pointing up yet again, making at least a bullish start likely beginning at Thursday’s opening bell.
What’s weird about all this, however, is that day after day, as we peruse our own portfolios looking for directional cues, we see the same message cropping up in the message line of our broker’s provided real-time updating portfolio management software: “Order imbalance xxx,000 shares <SELL>.”
That’s shorthand for a very brief trading halt as either the diminishing band of floor traders or the computerized trading systems themselves hold off for a few seconds until they can find (or unearth) enough BUY orders to match the big block of SELL orders so that normal trading can resume.
These “order imbalance” notices invariably crop up at the same time: 3:45 p.m. ET, 15 minutes before the 4 p.m. closing bell. They generally involve only the largest of the large cap stocks, like Apple (symbol: AAPL), General Dynamics (GD), Home Depot (HD) and the like.
One thing is not a mystery. Large and widely traded index ETFs have to square up their positions at or around the closing bell, and many of the “order imbalances” likely involve this kind of trading action, particularly those large to large-ish stocks that dominate the broader stock indexes like the S&P 500.
Even so, however, why have these order imbalance notices increased while stock averages are going up, up, up? Does somebody know something we don’t know? Is someone or some company or fund dumping large caps quietly and late in the day in ways that normal investors who don’t follow their stocks closely (like we do) can’t see, in order to maintain a bullish illusion?
Perma-bears and intrepid short-sellers could be at work here. But again, from our point of view, and lacking the super-sophisticated software and high-speed computing power the Big Boys use, we can only hazard a guess.
Bottom line: We’re pretty fully invested right now, having gotten back to the ongoing party a bit late after a disastrous pair of late-summer trading months. But this continuing and relatively modest rally still worries us a bit, even though we’re beginning to ease into what’s generally regarded as the favorable trading season that tends to end each calendar years.
As far as Mr. Market is concerned, maybe Ronald Reagan had it right (in another context): “Trust. But verify.”