Market wrap-up - basic signs that wave A comes to an end

It is basically a sign of a low, that retail investors pull out maximum amounts from mutual funds always at the worst time to do so. This is not an ultimate low though but in a bigger wave count together with the Hedge Fund liquidations, it's a capitulation to some degree.

Excerpt from Bloomberg:

Stock-Fund Investors Pull Record $70.7 Billion, TrimTabs Says

By Sree Vidya Bhaktavatsalam

Oct. 31 (Bloomberg) -- Investors withdrew a record $70.7 billion from U.S. stock mutual funds in October, according to data compiled by TrimTabs Investment Research, raising questions about how long they will stay out of the market.

Redemptions by individual investors and institutions jumped 26 percent from the previous high of $56 billion in September, Conrad Gann, chief operating officer of the Sausalito, California-based firm, said today in an interview.

Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York, said in a note to clients today that it can take a long time after losses for individual investors to feel comfortable buying stocks. After the 1987 stock market crash, retail stock- trading levels took four years to recover, he said.

``When the financial markets rattle `Mom and Dad Average American,' these investors pick up their cash and place it in their mattresses -- and won't come back into the capital markets until the pain of their previous losses is long forgotten,'' Hintz wrote.

Investors had stepped up their flight from stock and bond funds in mid-September after Lehman Brothers Holdings Inc. declared bankruptcy and world governments were forced to intervene to stabilize their economies. Through yesterday, the Standard & Poor's 500 Index slumped 18 percent in October, its worst month since 1987, and the MSCI World Index dropped 20 percent, the most in its 38-year history.

Volume picked up towards the end of today, while prices were marked up especially in the former loser segments like housing financials and semis to name a few. SPX managed a second day of gains while NDX even counts now 4 days back to back. It is still mandatory also from a technical as astrological that the first days of next week are to the downside, although Wednesday with a result may bring a little relief as the decision is out and the ECB will likely cut rates on Nov. 6th but that is a given fact as Trichet made a very clear indication which is a sure sign they will. Let's see how the first 2 days of the week go to decide by the magnitude and price action how things will work out for the coming week.

This weekend I do some sector analysis and try to figure the winners for the upcoming bigger rally once we have the real bottoms in.

Have a good weekend