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Contemplating the Close

Institutional money sometimes drives closing prices that don't represent the day's action.

We want so much for the last trades of the day to reflect the true action. We want the close to be at the high point. We want to feel like we bought something that went up after we bought it.

Unfortunately, there are sellers who want just the opposite. You have to understand the way institutional money works to be less embittered by a close that seems less-than-spectacular, or at least unrepresentative.

When my wife worked as a block trader for a couple of multibillion-dollar funds, she would always be working buy and sell orders. Let's say she was working a sell order of

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. Her sole goal in her work life was to have that closing price be lower than where she sold the bulk of her stock. Her trader, at the sell-side (brokerage firm) that was handling her order was similarly inclined. These are highly motivated people with firepower who are gauged strictly by how a stock goes out vs. the price they received.

You better believe that at day's end the sell-side broker is anxious to make him or herself look good. You better believe that they want the stock to be lower than where they sold it. That's how they get paid. My wife, if she felt the broker was doing an excellent job, as gauged by "where the stock went out," would often give the sell-side an extra penny or two per share.

So, keep that lesson in mind when you think "who sold off the close like that?" Remember that institutional sellers like to think they did a good job, and the only way to be sure that a good job was done was how the average of the sale compared to the close.

It starts to make all the sense in the world, doesn't it?

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any of the stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at