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Look Both Ways Going Into Quarter-End


And watch tails like Baidu, Wynn, and Goldman Sachs.

Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).

The conventional wisdom appears to be a continued run-up into quarter-end, a window-dressing markup where many money managers feel the need, the need for speed as their feet are held to the performance fire.

That fire burns both ways.

I recall a conversation many years ago I had with a friend of mine who worked for a large mutual fund.

He told me that one of the fund's favorite strategies was gunning some of its biggest holdings weeks prior to quarter-end, forcing competition to chase and selling size to the competition, then pulling the plug on a big piece of these names a week prior to quarter-end and hitting bids relentlessly, mercilessly, going into quarter-end and damaging the competition's performance.

By contrast, this made the fund's own performance shine all the more.

For a reversal, I'd watch for tails like Monday's on Baidu (BIDU). Tails often signify a high for months and months to come. Sometimes it burnishes the sign of the bear in a stock. That doesn't mean they roll over immediately, but looking back three, six, and nine months later, the message of the tale and the bodies buried under the reversal become conspicuous.

Notable tails yesterday include Wynn (WYNN) and Goldman Sachs (GS), or what I call the "high roller" and the "pit boss." Wynn, the stock and the man, have had an uncanny knack of timing the market. To wit, Mr. Wynn's sales of his Wynn holdings.

Also notable are yesterday's reversals in the Cliffs Natural (CLF) parabola, US Steel (X), and Freeport McMoran (FCX).

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No positions in stocks mentioned.

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