Enis’s Macro Wrap – Sell Your Winners

by Enis June 28, 2012 8:01 am • Commentary

Fascinating price action yesterday.  It was the quietest day in volume terms since March, the day before the EU summit.  Some big year-to-date winners like CMG, PNRA, AZO, TJX, HOG, FDO, DG, and the list goes on, were all down in a strong tape, as Dan mentioned on Fast Money last night.  Some of the biggest year-to-date losers like steel and energy stocks (AKS, X, APC, APA, etc) were up big.

The media likes clean headlines to explain market moves.  But yesterday’s action was an obvious flow of funds day to me.  Fund managers were selling some of their big winners and buying some of the big losers.  That IS the news, not the headlines used in hindsight to explain the stocks’ movements.  These types of days often occur close to month-end or quarter-end as institutional money managers re-adjust their portfolios.  And it pays to be aware of them.

Someone asked me yesterday why I was shorting AAPL.  This flow of funds story is my biggest reason.  Why short it now?  Why didn’t I short it a month ago, or wait a month to short it?  Given that AAPL is the SINGLE largest source of profits for stock investors in the world this year, what better way to book some profits than to sell AAPL.  When I first noticed this flow of funds at the start of the week, AAPL popped into my head as an idea.  Its weak price action on Tuesday’s up day added evidence to my hunch, so I initiated the trade.  I don’t plan to hold it for more than a few weeks, and I’ll get out if it acts stronger than I expect on any down days.  But I expect more selling of winners.