Market Tells: The Close

The talking heads in the news are celebrating the speculative buying, which they believe could last until Wednesday. What they’re not telling you is the sheer extent to which institutions have been selling into that strength—offloading into the liquidity to retail and so-called dumb money.

This pattern of selling into strength is clear if one simply observes the last few sessions’ closes, marked by the evaporation of hundreds of billions in total market capitalization. Institutions clearly didn’t want exposure going into the weekend last Friday or to carry overnight risk early this week. They’re distributing their selling across several days.

They’re doing this through a bit of liquidity harvesting—selling into strength where possible. But there’s virtually no real strength to support the market. Which means, if bears step in with aggressive selling later this week, even lower lows are very likely.