Tariff Tantrums.
I was watching market open on Friday with a sense of disbelief: The market, especially the Nasdaq, was dropping like a stone. What was going on?
Yes, it was the last trading day of the month, so there would be some portfolio rebalancing, window dressing or cash positioning going on, but that didn’t usually lead to such a precipitous drop on open. Let’s just check what normally happens on the last day of the month.
Portfolio Rebalancing
Many funds have mandates for fixed weightings (e.g. 60/40 stocks/bonds, or sector caps). Over the month, asset prices drift. On the last day, managers may sell outperformers and buy underperformers to restore the required balance. This creates flows in and out of major indices or sectors.
Many funds are benchmarked to indices so at the end of the month they adjust to track benchmark weight changes, increasing the volume and the volatility.
Window Dressing
Naturally, money managers want portfolios to look attractive in end-of-month (and especially end-of-quarter) reports, so they tweak to make the fund’s holdings look better. To achieve better-looking results they typically:
- Buy strongly performing stocks to show clients they “owned the winners.”
- Sell poor performers or controversial names so they don’t appear on the holdings list.
This practice can create artificial buying pressure in “hot” stocks, as money managers all want to show that they are on top of the latest market darling. Note it doesn’t change the find’s actual performance over the last month, just the appearance of what they own at the reporting date.
How Window Dressing Works
If, say a fund is about to publish its quarterly holdings report. Let’s say that NVIDIA has soared and AT&T has slumped. What they can do is
- buy NVDA just before the report so that it shows in their Top 10 Holdings, and
- sell AT&T just before the report so that clients don’t see the loser.
This is called window dressing because it doesn’t change the actual performance as the buy / sell happened too late to affect the results – but the published portfolio looks like the fund manager was smart by owning NVDA not AT&T.
Result? The fund looks more competent than it actually was.
Cash Positioning
Institutional investors often have inflows/outflows aligned with month-end (pension contributions, withdrawals, etc.). To meet obligations, they may raise cash or deploy excess cash right at month-end.
Performance Marking
Performance is often measured monthly, and money managers like their actual results to be good so they try to lock in gains or boost results.
Let’s say a fund has had a good month and wants to make sure that it closes strong (because they want investors to have confidence – and it’s how they get paid). What they can do is:
- Sell their winners to make sure that a last-day drop doesn’t dent their profits.
- Reduce risk exposure – sell volatile stocks so that the portfolio is less likely to swing at the last minute
They can also do something called ‘Marking the Book’.
Marking the book
Marking the book (or marking the close) means trading a security just before the valuation point (e.g. month-end) to influence the price used to value a portfolio.
Let’s say a fund owns 500k shares of a thinly traded small cap stock, whose last traded price was $10. Near the close, the fund (or a friendly broker) buys 1,000 shares and $10.50.
Now the stock’s official closing price is $10.50 so the funds entire position is marked up.
How much? Well, 500,000 shares up $0.50 – the fund has just improved its gains by $250,000 just by doing a trivial trade.
This is considered market manipulation if it is done intentionally, but it may be hard to tell the difference from legitimate rebalancing trades, which are OK.
Regulators monitor, and on occasion fine the fund managers.
Fund Managers Fined
In 2013, the SEC fined a hedge fund manager for marking the close in microcap stocks. He bought tiny amounts at inflated prices in the final minutes of trading, boosting month-end portfolio values by millions. Surveillance picked it up because:
- Trades were tiny vs. position size.
- Always at quarter-end.
- Prices fell back the next day
In January 2023, the SEC filed a civil enforcement lawsuit against a private hedge fund manager accused of inflating his fund’s value by manipulating the closing price of its largest holding—a thinly traded equity.
- The manager allegedly funneled money to a friend, who repeatedly placed small buy orders near the close (especially on month-end days) at prices above the quoted market value.
- These orders artificially increased the stock’s closing price by 13–99% across multiple month-ends.
- The inflated close boosted the fund’s net asset value, enabling higher reported performance and greater investor interest and compensation.
And of course in movies. We have had the Wolf of Wall Street’ where they ran up stock prices with orchestrated trades and then dumped them on unsuspecting investors.
Trading Places – a fun movie – was about market manipulation, not ‘marking the close’ but ‘cornering the market’ in frozen orange juice.
Turn-of-the-Month Effect
So all these activities are going on at month end. What does this mean for ETFs? It is usually good news (just not this time). Historically, on the last trading day of the month the S&P 500 shows a positive bias. 60 – 65% of month-end sessions close higher than on the previous day, which is higher than the 53-55% baseline ‘up-day frequency’ for the S&P overall. Well, that definitely wasn’t happening on Friday. Typically, the wild swings happen in the last hour – but not on Friday, it was all in the first half hour.
Tariff Tantrums
It could have been the AI outlook, or the PCE data – but I suspect that it was this:
The court announcement that ruled Trump’s tariffs illegal occurred on Friday, August 29, 2025, when the U.S. Court of Appeals for the Federal Circuit issued a 7–4 decision stating that the tariffs exceeded presidential authority under the International Emergency Economic Powers Act (IEEPA).
Just when everything was starting to settle down, we get another court order. There have already been rulings on this matter from the U.S. Court of International Trade, the Appeals Court, the Federal Circuit, and now we get:
The court also Delayed implementation of the ruling until October 14, giving the administration time to appeal to the Supreme Court.
I am not going to get into the politics of it or whether the tariffs are good or bad – I am just frustrated with all this lawfare, how everything is dragged interminably through the courts, who then rule this way and that way depending on their make-up. I want to say frustratedly:
Why can’t everyone just play nice??
Take the brakes off and let the market go higher – and let us get on with making money!! OK, rant over
To the markets
Really not a lot to talk about that I haven’t already. Let’s see the charts.
SPY Charts
Nothing much to see on the SPY chart – it looks like business as usual. There were 2 new highs last week, and a bit of a pullback on Friday. That’s about it.
On the longer term chart everything looks quite normal as well.
SPYG Charts
SPYG is still hovering around the $100 level, in a consolidation phase.
On the long term chart, we see that is still hasn’t broken into the trading channel, but keeps bumping into the lower bound – which seems to be acting as resistance.
QQQ Charts
QQQ has not been making new highs since reaching $580 on the 13th August. Like SPYG, it is in a consolidation phase, in the range $560 – $580.
On the long term chart, we see that it is in the lower half of its trading channel.
VIX (Volatility) Chart
A historical look at the VIX over the last 35 years. We’re not at a high level, still in low-volatility territory, but we are not ultra-low compared with history.
ITMeter
The week ahead . . .
I’ve just realised – today is the labor day holiday! The rest of the week sees the Beige Book (regional economic conditions) on Wednesday and several Fed officials are scheduled to speak. AI earnings: Salesforce (Wed) and Broadcomm (Thu).
I have made a BLOG ARCHIVE with all the blog posts going back to the start so that it is easier to find things.
I am also re-tagging all the posts to try to standardize the search. It is taking a bit longer than I expected (but then, things always do. I constantly underestimate the time it takes to do things!).
This blog is post No. 180! Crazy. I originally envisaged the blog as a once-a-month update just on ITM performance, but it just seems to have grown and evolved. Now I am looking at it, seeing how big it is, and wondering what I should do with it. Suggestions welcome.
The unexpected - whales!!
On my morning walk – whales! I have never seen them so close to shore before. Was super-excited. Those are surfers in the water with them.
You just never know what life is going to throw your way! They were going between the swimmers – and the little one kept obligingly waving its tail.
The Futures
The futures have just dropped from + to – in the last 10 minutes. They are now slightly negative, but it is still a day and a half before market opens.
Fingers crossed for a good week!
Heather
Trade the tide, not the waves
30 Responses
Hello Heather,
I just recently came across covered call ETFs on YouTube. They have been around a while but I didn’t know about them until I saw the YouTube videos. And there are a lot of them. They supposedly generate high yield dividends for investors, particularly retirees interested in receiving dividends. I know what you think about dividends but it does look interesting. Would love to hear your thoughts.
Also some of your bloggers have been mentioning poor man’s covered calls where you write options on ITM options contracts. Can this be done successfully using the DITM method that you taught us.?
Thank you so much for your books and blog You have been a life changing influence for me and many others. I like making money in the stock market.
Best wishes,
Andy C
P.S. I am sold on the 10/200 method for getting in and out. Can’t understand why people are questioning it. I trust your back testing.
Hi Andy
I’ve donw several blogs on covered calls, and concluded that they are just not worth the bother. However, I’ve been testing it out again recently.
Based on 1,000 SPY and 1,000 QQQ shares I can generate around $3- 4 k in premiums per week. Which is nice – but requires $1.2m for cash secured puts. If I make that every week that is $150k – $200k per year – but based on the capital it ties up that is 13% – 17% – not a great rate of return. Of course that is not counting when you are exercised – I am still working on seeing if I can find a strategy. But so far, its not looking great, although I can see it being usedful in a sideways market.
Dividends – SPY gets you 1.11 – 1.12% in dividends, QQQ slightly less at 0.49%. Is it worth it? In my opinion, no.
‘Poor man’s covered calls’ – yes, I am adding them into my experiement – but I want to keep my ITM section ‘pure’ – but I will be checking it out.
And thank you for your kind words – I am very, very glad I have been able to help. I have been lucky (well, eventually! After the pain!) and I hope that I can help others become ‘lucky’ too.
x
h
I think you should get an award (I have no idea whom from) for the photos you pick to go along with your blog. It must take some time to do that and especially to do it as appropriately as you do.
HI Jay – thank you for letting me know! It amuses me to get the photos to illustrate what I am trying to say, but I often wonder if I am just indulging myself and that others may finr them silly or annoying.
Thanks for letting me know someone appreciates them!
h
Good information about month end. Thank you Heather.
Hi Camille – yes, I wish people really understood what is happening. They invest finds with mon ey manah=gers, and trust them, not realizing that all these nmachinations go on!
h
Dear Heather,
Thank you for your weekly boogs as always. September is usually the worst month historically so please trade and invest prudently and patiently.
Sincerely,
George Henry
Hey George – hyaven’t heard for a while!
Folloing the market right now, somewhat depressing!!!
Going back to wallow in it now.
x
h
I went to Hong Kong and Philippines for the last two weeks of August of 2025. I am back in Los Angeles. Please take care of ourselves and each other, our fellows of ITM Method readers like the original Berkshire Hathaway class A investors back in the 1960s in Omaha, Nebraska.
Hi Heather, I hope you are well!
What is your money management strategy to live without working in order to stay in the market and not run out of money? Because taking too much money out of the market at the wrong time could make someone run out.
Also, I know you don’t recommend individual stocks, but can your system be used effectively on individual stocks? And can it be used with etfs on things like gold, real estate, long-term treasuries, and bitcoin?
Thanks!
Hi Brian,
I am still increasing my capital every year – I never take out more than I have made that year, and luckily my capital is now large enough to let me live rather well and still keep increasing. I don’t have any other source of income other than trading. (yes, the books! they are rather a zero-sum gain by the time I have paid Amazon and all the software I need to produce them and the blog – more of an indulgence than a money-making venture!)
I do, however, sequester some of my capital in straght SPY and QQQ shares on the assumption that they are ‘safe’ although they don’t give any leverage.The rest in ITM with somewhere between 5-10% in ATM / OTM – but only when I think market condisions are right.
I am also trying a variation on the Wheel strategy using the SPY / QQQ shares – monitoring how it is going, will put it in blog if I think it worthwhile.
Yes, I am lucky, but I wasn’t always so lucky – so many years I thought I would never be able to give up work. But it eventually happened – actually it was a case of it being forced on me, as the ATO (Aust Tax Office) changed the rules so all of a sudden my business was not profitable and so worth nothing. That was a scary time, but in hindsight it was a blessing – I was getting completely worn out.
Re ITM on stocks – the only problem is that stocks come and go, but indexes are forever. You never know what is going to happen with a stock, so backtesting is of limited use. Gold? I should probably have been in it this year – but I wasn’t. Real estate? I was in that some years ago, had 15 rental properties, but these have all been sold, the regulations here are now very anti-landlord. Bitcoin? I don’t touch it – I never invest in anything I can’t understand and predict.
Hope this helps!
h
h
Hey there, just two thumbs up for the audio version, loved it !!
k
Thank you – were the accents OK? Understandable?
h
Hi Heather, I accidentally hit send before I was finished. I was going thru old emails and trying to get things organized when I came across your reply to my comment on your blog. Thank you for taking my criticism so nicely. I went back onto your site and see that you are still very much engaged with investing and options teaching and coaching. This makes me very happy. And I can see by your blog that you are very much for real and very active. In hindsight part of my criticism came from the idea that there are so many people putting out cheap e-commerce products that I judged the product that I purchased and commented on. Your response was excellent and on the mark. Thank you for that.
As for me to say that the last couple of years have been a struggle would be a HUGE understatement. I still want to get active in investing in general and with options specifically. I love the information that you have continued to put up on your site and will look forward to purchasing more of your books and products as the opportunities present themselves to me.
I promise to leave a sterling review for the next product I purchase from your site and/or Amazon. I hope all is well for you on your end of the world and wish you all the best. I hope that we can chat/talk at some point in the future.
Warmest regards,
Kirk
P.S. It’s funny that your email filter thinks that my email is fake. It was my first email and uses my first and last name. I hope that this one makes it to your inbox proper.
Thaynk you Kirk – It takes decency and courage to do what you have just done.
I can’t say I wasn’t stung by your criticism – one does tend to take to heart all the bad stuff and mull over it, but it is part and parcel of publishing anything – lots of people are not going to like what you say.
So thank you again – I really appreciate you taking the time to contact me.
h
P.S. the email address – you mistyped it as ‘uahoo.com’ not ‘yahoo.com’ so it was flagged as possible SPAM.
The reason no one can play nice is because Trump doesn’t play nice. My wife says he has the instincts of a Dictator. I say he has not only the Instincts but the Personality of one and the actions to confirm that proposition. In case anyone thinks I am a bleeding heart Democrat, NO No. I have never voted for a Democrat for President, but Trump is the only so called Republican that I did not vote for nor will I ever vote for the likes of him. I have always otherwise voted for Republicans for President. He is a RINO (Republican in name only) for sure and the antithesis of Ronald Reagan. Hopefully I will not burden you with my personal political views again but I cannot guarantee it.
HI Tommy – I try to keep the BLOG free from political comment – as everyone takes sides and it gets nasty very quickly.
The blog and the ITM strategies deal with what is in front of us – not whether we like it or not. The political situation is just there, no matter who is in power, and ITM’s job is to work nout how to trade it.
h
I understand and wish I did not feel compelled to post this but I have never in all all my years felt these kind of thoughts.
Hey Tommy – I know that things are very fraught right now – and that everything is polarised.
People who have been my friends for decades – now I find myself choosing my words and not saying what I think in case I upset them.
I remember when we used to have rollicking arguments about all this stuff – sometimes you would take the other side just for the fun of the argument and getting your logic straight.
UNfortunately, that is not the world any more – I have very strong political views, but now feel that I can’t express them – and that includes the blog, which I try to keep apolitical.
I hope you understand.
h
I like the audio because sometimes I’m too lazy to read. Thank you!
HI Jeanette – thanks for feedback – its funny how different people like different ways – I prefer to read because it is much quicker for me. But glad you approve. Were the voices OK? Understandable?
h
Heather, this is a great article explaining month-end and quarterly manipulations. Very helpful.
I started listening to the audio and began reading also. I had to back up the feed twice to clarify the AI voice was saying “dep-dive”. I turned it off.
I just ordered Weinsteins book, so Ill weigh in on that sell approach when I know more. First reaction is to stick with the 10/200 exit.
Meanwhile… how about if YOU record your weekly blog? Or How about if YOU read your next book for Audible? Yes !
Brilliant !
And, whales !? Spectacular !
Appreciating you.
UncleDave
Hey Dave – I’ll check if I can change the voices in the podcast – although I thought they were rather unobtrusive American accents. If I did it you would be treated to a Sctottish / English / Australian accent – not sure how that would go down!
But you will have a chance to see and hear me when I do the podcasts – remember, be kind!
h
Stan Weinstein, author of SECRETS OF PROFITING IN BULL AND BEAR MARKETS, mentions Investors and Traders. Today, for Traders he suggest exiting 1/3 of the trade at a close below 50 sma, another 1/3 below the 100 sma, and the final 1/3 when trade closes below the 200 sma. If the trade breaks back up above the 50 or 100 sma he may or may not re-enter the trade. Of course if it rises above the 200 sma we are back to the original ITM strategy. This seems to me much better than waiting until 10 sma crosses the 200 sma. What do you think?
Heather will probably respond to your post soon, but she had a blog post a couple weeks back (and several in the past) that talked about this very question https://heathercullen.com/protecting-profits/ . Over time, her backtests have shown that the 10-200 SMA Crossover has yielded the best ITM results for the last 30 years. The only other “indicator” I watch is the NFCI (National Financial Conditions Index) published each week by the Chicago Fed. I use it to help me know when are the safest times to roll up and out.
Hi Michael,
How do you use the NFCI to roll up or out? What values do you look for or use?
Yes – good question – Michael?
We’re all ears (or eyes to be precise)
h
Hey Charity, It’s not really the value; it’s the direction.
Go to TradingView and pull up the SPY chart. Overlay the NFCI symbol on top of it by clicking that little circle with the plus + inside it beside the SPY title. Look at the NFCI compared to the SPY (TV will normally change your chart to a percentage, but it doesn’t matter). When the NFCI turns from down to up, the SPY tends to pause or drop. When the NFCI turns from up to down, the SPY tends to increase.
Look at the NFCI (reported at 8:30am on February 12, 2025) for the week ending Feb 7, 2025, right before the Tariff Crash. See how it changed from down to up? That is a bad sign for the market. See how the NFCI turned down again on April 23 for the prior week? Credit and risk was beginning to loosen again by the big boys, and SPY started a bull run again.
Look at Sept 2018. Look at Feb 2020. Great huh? Holy Grail? No! Now look at the second half of 2021 (which may have been a warning of outside interference and a coming bear; I don’t know). The NFCI was useless during that bull run, but eventually the market obeyed in 2022; credit was too tight.
Last week, the NFCI was unchanged according to https://www.chicagofed.org/research/data/nfci/current-data. That’s where you can find the real data. And when it turns flat, that is usually a reversal in the TV indicator. The new report for last week is coming out at 8:30 am EDT on Wednesday. Will it signal a reversal/pause or continuation? We’ll see….
Hi (different) Michael – thank you. I have been meaning to check out the NFCI – I must do that.
h
Michael – this method uses 3 different SMAs and would work if every time it dropped through the 50 SMA it went on to drop through the 100 SMA nad then the 200 SMA.
But it doesn’t do this every time. It may drop through the 50SMA and then head back up again – so when do you get back in?
Try putting the 50, 100 and 200 SMA on a chart and stepping through from 2000 onwards and I think you will find a lot of situations where that is the case.
Getting ou is the easy part – the difficult part is when do you get back in?
h