Fund managers are constrained from selling, Markets fall below 50 day moving average

Episode 30:   Mutual fund managers and other institutional investors are constrained by the mandate of their prospectus.  In some cases this prevents them from selling equities and moving to cash, to avoid an apparent stock market meltdown.  They’re forced to buy and hold.  Perhaps that’s why the financial industry tries to convince individual investors that they too should shackle themselves into buy and hold handcuffs.

When fund managers sense a pending market correction, if they can’t move to cash, they’re forced to purchase the safest stocks- usually big blue chip dividend paying companies.  Again, perhaps that’s why the Russell 2000 is doing so poorly and the DOW has been hitting new highs.

Today the major indexes fell hard below their 50 day moving averages.  This might be a harbinger of things to come.

The US Dollar remains strong.

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