Stocks Give Way Under ETF Weight

The stocks give way when there are motivated sellers of common stocks and ETFs.
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It seems like there are a lot of margined players out there. People who just don't have enough capital to play.

When I looked at the

Ameritrade

(AMTD) - Get Report

numbers the other day, I saw a big increase in margin, which could explain some of the nastiness I see out there.

I think, also, this is the first big selloff when we have seen the interaction between the ETFs and the common stocks. The common stocks seem even worse at handling the downside than they are the upside when the stocks get ramped up by the tail that is the ETFs.

This selloff reminds me of the first couple of years when the Chicago futures on the market started -- before the 1987 crash -- when there were tons of people who didn't understand the interaction between the two. Then you could have a stock be hammered and hammered again by reloaded sellers, and the buyers simply didn't have a chance to get down there. That's how fast things were falling. The buybacks couldn't cushion the fall because the buybacks weren't conditioned for down 226 days.

Consequently you got frightening moves. When you have motivated sellers of common and motivated sellers of ETFs converging on the system simultaneously, you have to believe that something has to give, and what gives are the stocks themselves. Far further and more rapidly than anyone thought possible.

At the time of publication, Cramer was long AMTD.

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