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A Floor Under The Market?

It’s not lost on traders that many are hopeful the markets will drop, so they can buy at a lower price.

But how much of a chance will they get to do that? Because so many want to do that, there’s a belief that there is a floor under the market that will prevent a dramatic drop in stocks.

Look at what has happened in the last few days:

Banks:

  • Down 10% from recent highs at the close yesterday...up 4 percent today

Oil stocks:

  • Down 6 percent from recent highs at the close yesterday, up 2 percent today

Commodity stocks:

  • Down 10 percent from recent highs at the close yesterday, up 3 percent today

Elsewhere:

Time to drag out the hoary end-of the year for mutual fund story: it happens every year. Some traders attributed the recent weakness to tax loss selling ahead of the end of the fiscal year for mutual funds...To close out their books on October 31, they have to finish their trades three trades before, to comply with the three-day settlement requirement. It's true that some funds do close out their books on October 31, and no doubt some tax loss selling occurs ahead of that.

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