A 1% Distribution Day.

Stocks for the most part suffered their first decline of over 1% in something like 90 trading sessions yesterday. Stocks have gone pretty much straight up since late July so something like this shouldn't be viewed with too much concern. I think we will have to deal with two dynamics through the end of the year.

1. There are a lot of investors {hedge funds, mutual funds etc} that have a vested interest in higher prices between now and the end of 2006. From a marketing standpoint it always helps mutual funds to end on a positive note. It helps bring in new cash. There are many hedge funds (the 1% fee + 20% of the profits crowd) that simply haven't done as well as the markets this year. These funds will do what they can in the remaining time of 2006 to "make their year".

2. The other side of this coin is that a lot of money has been made since July and any sustained weakness will increase the pressure to lock in some of these profits.

I don't know which side will win but this dynamic is something to be aware of as we slide into years end.