November Month-End Rebalancing: Over $3 Billion In Stock Sold

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Includes: ALTL, BXDB, BXUB, BXUC, DDM, DIA, DOG, DXD, EEH, EPS, EQL, EQWL, FWDD, IVV, IWB, JKD, LGLV, NY, PRF, PSQ, QID-OLD, QLD, QQEW, QQQ, QQQE, QQXT, ROLA, RSP, RWL, SCHX, SDOW, SDS, SFLA, SH, SPHB, SPLG, SPLV, SPXH, SPXL, SPXS, SPXU-OLD, SPY, SQQQ, SSO, TNDQ, TQQQ, TRND, TRSK, UDOW, UPRO, VONE, VOO, VV
by: Danny Riley


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The S&P 500 futures SPY rallied into the November month end by making its 45th new contract high of the year at 1812.50.

With the stock market up so much at the end of the month and the S&P up nearly 27% in 2013, the funds had to sell equities and buy bonds on the last trading day of the month. The late day rebalancing was bonds vs. equities for passive pensions and investment firms.

Putting the money back to work

Last week we saw 4 consecutive days of sell side imbalances. Last Monday’s was 400mil to sell, Tuesday was 220mil for sale, Wednesday was $1.4bil to sell to $2.6mil for sale and on Friday’s close there was $1.9bil to $3bil for sale with 30 of the Dow 30 for sale.

Depending on how you add it up, the total cash sold amounted to $3.94 billion to $6.24 billion sold on the close total last week. Those numbers could be high, but it corresponds with what we saw. We asked around and a lot of traders we talk to said they can’t remember that much selling going into the closes in a long time, at least since late June when the word taper was being thrown around all the time. We think at least part of that money gets put back to work in the first week of December.

In Asia 7 out of 11 markets closed higher and in Europe 8 out of 12 markets are trading higher. This week’s economic calendar includes 33 different economic releases, 13 T-bill or T-bond announcements or auctions, the Friday jobs report and the Fed’s Charles Plosser and Charles Evans speaking on Friday.

Today’s economic calendar has the Gallup U.S. consumer spending measure, PMI manufacturing index, ISM mfg index, and construction spending. The first trading week of December is packed with economic reports and the week is capped off with Friday’s jobs report.

The S&P futures are going up but in very slow fashion. Look at the last 10 days of net changes: Nov 15 +5.8, Nov 18 -4.8, Nov 19 -3.5, Nov 20 -5.5, Nov 21 +14, Nov 22 +7.5, Nov 25 + 1.2, Nov 26 .40, Nov 27 +2.3, Nov 29 -0.2. In those 10 days, there was only one day that the S&P closed up 14 handles, the rest of the days are all under 8 handles and most under 5.5 handles of net change.

Our view

The Pit Bull said it, too; there has never been a time like we are seeing now. Oil sells off hard over $2 and then rallies back up nearly $2. The ESZ13 rallies and sells off a little. It’s all part of the water in the bathtub. Push it one way and then the other.

Volume has been insanely low. From Wednesday night’s Globex session to the close of Friday’s abbreviated session, only 815,000 ESZ13 traded. I have never seen such a low number. And despite all the cash selling the S&P closed above 1800.00.

That said, today is a new week and month. According to the Trader’s Almanac the first trading day of December has the Nasdaq up 19 of the last 25 occasions. We again lean to selling the early rally and buying weakness.

As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.

  • In Asia, 6 of 11 markets closed higher: Shanghai Comp. -0.59%, Hang Seng +0.66%, Nikkei 0.04%.
  • In Europe 8 of 12 markets are trading lower: DAX +0.10%, FTSE -0.69%.
  • Morning headline: “Investors cautiously await week’s economic numbers”
  • Total volume: LOW 815k ESZ and 5.5k SPZ traded
  • Economic calendar: Gallup U.S. consumer spending measure, PMI manufacturing index, ISM mfg index, and construction spending.