Brief note by Chad Brand at Peridot Capital Management.
Watch the 2002, 2008 Intra-Day S&P 500 Lows
The forced selling and mass liquidations are continuing, with the pre-market futures trading limit down this morning. October has always been the most volatile month of the year, and investment fund fiscal years end a week from today (as opposed to a normal December year-end).
Don’t fool yourself into thinking the market action here is based on fundamentals, because everything we are seeing is simply irrational behavior based on forced selling. Buyers are balking because once things become irrational, there is no inherent floor to prices.
If you want to watch specific levels, the 2002 S&P 500 low was 768. The 2008 low so far was 839. The S&P 500 closed at 908 yesterday, and traded limit down (60 points) to 855 this morning. If we don’t hold those levels, another round of computerized sell programs will likely hit the market. The support there should be strong, but in this market, who knows what will happen.
Update: 10:00am — Here is a graphical representation of the last two decades:
Additional note:
Wild Market: Sign of a Major Hedge Fund Blowup?
Excerpt: "Once the new kings of Wall Street, hedge funds are now looking like the court jester.
It’s all speculation at this point, but it seems highly likely we’ll find out that one or more major hedge funds imploded this week, especially given the dramatic moves in currencies, commodities and emerging markets.
Wild swings in the markets most frequented by speculators are "only the result of imploding hedge funds leading to massive liquidations," writes Ashraf Laidi, Chief FX Strategist at CMC Markets. (Laidi declined to name names.)…
…While few tears are being shed for the "pirates of finance", forced selling by hedge funds is having a direct affect on the portfolios of "average" investors, especially those overweight emerging markets and commodities."
