"In a bull market, mutual funds are not going to sell, they will hedge their underlying positions using futures and options. They must be in the market because the alternatives will leave them underperforming if the market rises and redemptions will happen if they are underweighted and underperform on a good year"
true. but most mutual funds aren't gonna sell, and CAN"T sell - PERIOD - any more than their respective redemptions. why? cause it's in their charter. most MF's have to stay nearly fully invested, and most mutual funds can't short either. this, of course, is in the long smart, since in the long run, the markets build wealth.
but most mutual funds cannot go 20% (let alone 50%) cash. they HAVE to be fully invested. as a futures index trader, i am well aware that mutual funds and institutions are behind much of the trading, and that's fine with me. part of trading is learning how to recognize their footprints.
mutual funds and institutions also want to beat VWAP and they tend to (as i said) buy weakness and sell strength.
also, many institutions buy to offset other positions, etc. and their purchases may be balanced by cash market positions etc.
regardless, this idea of manipulation is absurd. look, ONE thing moves the market higher - when buy orders lift offers, the market HAS to go up. it's called demand exceeding supply. it is not rocket science. the CBOT book, for instance, doesn't know WHO is buying (GSCO or johnny smith), it's just an order in a bookm and nobody gets special treatment. obviously, the pit is a bit different, and i have found utility in listening to the pit audio feed to find out what the big boys are doing.
but again, people who are whinging about "manipulation" are almost always losing (or missing out) traders, who can't admit they were wrong in their position, or hesitant to take one, and missed a hyooge move.
hey, i'm the first to admit i did not catch the vast majority of that late day move. i got stopped out in a short for -10, then got long and won about 6, 9, and 16 points long. hey, that's trading.
then, i scalped another 6 points long in the middle of the move. did i bank? hell no. was it because of "manipualtion?" SPARE ME!
a short term trader doesn't care WHY, he should care WHAT.
a longer term trader/investor can enhance his edge by analysis of fundies, and the why's but when intraday trading, it does nto MATTER why there is a buying frenzy - just that he needs to get in and capitalize, preferably BEFORE the buying commences with any vigor.
any trader who attributes these moves to "manipulation" is a whinger who simply cannot go with the market. don't embrace your opinion, embrace the market
